The purpose of this study is to investigate how global supply chain pressure affects firms' inventory adjustment and how this relationship depends on their working capital structure, specifically supplier trade credit, customer credit exposure, and liquidity.
We draw on organizational information processing theory and real options theory to develop hypotheses about how global supply chain pressure and working capital structure shape firm inventory adjustment. The hypotheses are tested using a panel of 214,674 firm-quarter observations from 6,499 publicly listed US manufacturing firms over 1998–2025. We employ a shift–share panel design with firm and quarter fixed effects for the empirical analysis.
The results reveal that firms increase inventory as global supply chain pressure rises, but the average buffering response masks substantial heterogeneity in how firms manage supply uncertainty. Firms with higher supplier trade credit and customer credit exposure respond more strongly by increasing inventory. Liquidity has the opposite effect. It weakens the inventory response and, at high levels, reverses it, indicating a shift toward flexibility preservation. Liquidity further conditions the role of supplier trade credit and customer credit exposure, such that supplier financing matters most when liquidity is scarce, whereas customer credit exposure becomes more consequential when liquidity is abundant.
This study contributes to inventory management research by integrating the buffering and flexibility preservation perspectives on inventory under uncertain supply chain conditions. It shows that rising global supply chain pressure does not uniformly lead firms to build inventory buffers. Instead, the balance between buffering and flexibility preservation depends on the working capital structure that supports or constrains inventory commitment. The study also advances a liquidity-centered account of inventory adjustment by showing that liquidity changes both the inventory response to global supply chain pressure and the roles of supplier financing and customer credit exposure in supporting inventory buffers under strained supply conditions.
