Risk-Taking Disruption Recovery in the Rapid Evolving Crisis : Evidence from the Early COVID-19 Outbreak in China

The speed of recovery from supply chain disruption has been identified as the predominant factor in building a resilient supply chain. However, COVID-19, as a rapidly evolving crisis, may challenge this assumption. Infection risk concerns would increase if managers decided to resume production immediately after the shutdown caused by the pandemic. Any incidents of infection may lead to further shutdowns of production lines and undermine firms’ long-term cash flows. Sampling 244 production resumption announcements by Chinese manufacturers in the early COVID-19 crisis (February to March 2020), our analysis shows that investors perceived the earlier production resumptions are with higher risk (indicated by declined stock price). Such concerns were exacerbated by more locally confirmed cases of COVID-19, while less salient for manufacturers with high debts (liquidity pressure). In addition, concerns about risks raised in response to early manufacturers’ resumption of production were found to proliferate overseas, as reflected by the more negative investor reactions seen in 252 US customers of the Chinese manufacturers. This study calls for a reassessment of the current disruption management mindset in response to new disasters and rapidly evolving crises (e.g., COVID-19), and provides theoretical, practical, and policy implications for building resilient supply chains