This research examines partisan misalignment between a state's political configuration and federal political authority as a distinct form of subnational political risk and its effects on focal firms' supplier counts in high-risk states. Furthermore, we explore the moderating effect of the focal firm's motivation, opportunity and ability on this relationship.
Using the FactSet Revere, Compustat and Orbis databases, we construct a panel of 186,453 firm-year-state observations from 13,919 firms in the US manufacturing industry (2004–2023) and employ Poisson regression to test our hypotheses.
Firms are more likely to reduce the number of suppliers in high-risk states when the state in which the supplier is located is exposed to subnational political risk. The effect is attenuated when the focal firm has a longer average supplier relationship duration and when the focal firm itself faces subnational political risk, reflecting weaker motivation and constrained ability to implement this strategy, respectively. The effect is amplified when the focal firm has a higher network status, reflecting a greater opportunity to implement this strategy.
This research extends the supply chain management literature by embedding subnational political risk into the domestic supplier adjustment framework, which reveals how subnational political risk drives dynamic supplier adjustments. Our findings provide managers with a theoretical roadmap for crafting dynamic supply chain strategies under subnational political risk.
