Abstract
Escalating geopolitical risks pose significant challenges to global supply chains and corporate operations. Firms must adjust their strategies to cope with the rising era of political conflicts. This thesis consists of two essays that quantify the impact of political conflicts on firms' strategic responses, specifically in terms of supply chain adjustments and decarbonization efforts.The first essay focuses on the U.S. sanctions-induced political uncertainty. The use of sanctions as a means of addressing international disputes has been increasingly prevalent in recent years, causing significant uncertainty within global supply chain networks. This essay examines how firms adapt their supply chain configurations in response to US sanctions on suppliers. Using comprehensive global supply-chain data and a difference-in-differences design, this essay shows that affected firms not only sever ties with sanctioned suppliers but also scale back relationships with non-sanctioned suppliers located in sanctioned countries, indicating spillovers of sanction risk through supply-chain linkages. To bolster resilience, firms broaden their supplier bases, increase geographic diversification, relocate sourcing to countries with regional trade agreements and to nearby countries, and maintain more backup suppliers. The effects vary by firm origin: firms in sanctioned regions frequently reshore, experiencing lower profitability and sales, whereas firms in non-sanctioned regions pursue offshoring and diversification with limited financial impact. Notably, U.S.-based firms make fewer adjustments and are largely unaffected, with improved financial performance. By integrating political risk and economic efficiency, this essay provides a framework for understanding strategic supply chain reconfiguration under geopolitical constraints, offering insights for operations research and global trade policy.
The second essay explores the environmental costs associated with the U.S.-China trade war. Specifically, this essay utilizes the 2018-2019 U.S.-China tariff hikes as a quasi-natural experiment to examine the impact of trade disruptions on the carbon emissions of firms linked to global supply chains. Following the tariff increase, these firms experienced a significant rise in Scope 1 and Scope 2 emissions compared to their minimally-affected counterparts. This essay delves deeper into the mechanisms driving this observed effect. First, firms subject to significantly increased tariffs on their green-related imports experienced a considerable increase in greenhouse gas emissions compared to those not subject to such tariff hikes. Second, tariff hikes impose significant financial constraints and distress on the affected firms compared to their minimally-affected counterparts. These financial constraints, induced by the tariff conflict, significantly disrupt firms' decarbonization efforts, leading to reduced investment in green technologies and environmentally-focused employment. Consequently, firms that experience significant financial strain tend to emit more greenhouse gases after the tariff shock. Finally, although affected firms are forced to increase their own-controlled greenhouse gas emissions, they tend to adopt more sustainable adjustments to their supply chains in an effort to mitigate supplier-related greenhouse gas emissions.
| Date of Award | 19 Sept 2025 |
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| Original language | English |
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| Supervisor | Yinggang ZHOU (External Supervisor) & Yaxuan QI (Supervisor) |