Research

Sustainable development demands addressing two core challenges: mobilizing financial resources and aligning stakeholder incentives. This article surveys the operations-finance interface literature through the lens of “Mobilizing Resources” and “Aligning Incentives” framework. We highlight how the literature advances our knowledge of mitigating SME financing constraints and crafting operationally-informed financial contracts to internalize externalities. We identify a critical gap: while theoretical models for incentive alignment are well-established, empirical evidence remains limited due to the difficulty of analyzing unstructured data. To bridge this gap, we present large language models (LLMs) as a rigorous methodological toolkit for empirical operations management research. We outline a four-step framework—Problem Definition, Model Selection, Prompt Engineering, and Validation—and illustrate its application via a case study that extracts novel data on supplier finance programs from corporate 10-K filings. We conclude by proposing a unified research agenda to advance future research at the intersection of operations, finance, and sustainability.

Manufacturing firms routinely face exogenous cost shocks—such as taxes, tariffs, and regulatory shifts—that alter their cost structures, forcing a fundamental trade-off between reorganizing production to minimize direct costs and maintaining established production "recipes" to preserve efficiency. This paper examines this dilemma using India's 2017 Goods and Services Tax (GST) reform as a natural experiment which introduced heterogeneous effective tax changes across plants by unifying taxes and eliminating cascading input taxes. Leveraging granular plant-level data from 72,000 manufacturing facilities over nine years, we employ a continuous difference-in-differences (DiD) design to track plant responses. We find that plants facing larger tax increases systematically shift product portfolios toward lower-rate categories. We distinguish between reclassification (minor product modifications that preserve existing production capabilities) and reorganization (fundamental operational restructuring with new inputs). Resource-constrained plants favor low-cost reclassification, while larger, capital-intensive plants pursue reorganization. These adjustments, however, come at a steep operational cost: total factor productivity (TFP) declines by 2.2 percent for every 10 percentage-point increase in effective tax rates. This decline is driven by a "quantity-for-quality" substitution in material sourcing, where plants switch to lower-quality domestic inputs to cut costs, eroding material efficiency despite simultaneous gains in labor, capital, and inventory productivity. Taken together, these patterns reveal a clear cost-efficiency trade-off: plants lower their effective tax and working-capital burdens through portfolio shifts, input substitution, and leaner inventories, but accept lower production efficiency in return. Our findings provide actionable insights for managers building operational resilience and for policymakers on mitigating unintended productivity losses from heterogeneous policy shocks.

Problem definition: Concerned about rising geopolitical tensions between the U.S. and China, many U.S. firms in recent years have sought to reduce their dependence on China in an attempt to hedge against potential disruptions in Chinese supply chains. U.S. importers have increasingly turned to intermediary countries like Vietnam and Mexico in order to diversify their supplier base. However, can these importers develop supply chains that are independent from China? Or are they still retaining indirect dependence on China by rerouting their supply chains via these third-party countries? Methodology/results: Utilizing transaction-level customs import-export data, we develop a novel measure to assess firm-product-level indirect dependence of U.S. importers on China via their suppliers in Vietnam and Mexico. Our findings indicate a substantial increase in indirect dependence on China post-Trade War—indirect dependence via Vietnam and Mexico increased by approximately 21% and 5.5% respectively—suggesting that despite efforts to reduce dependence on China, U.S. supply chains remain indirectly dependent on China via third-party nations. We further explore the role of product channels, observing that more downstream products and products for which China has a significant revealed comparative advantage (RCA) experience greater increases in indirect dependence through Vietnam. In contrast, more upstream products exhibit more substantial increases through Mexico. Decomposing indirect dependence into U.S. import share and suppliers' input dependence on China reveals asymmetric growth patterns: for Vietnam, the latter component grows more significantly, while for Mexico, the former shows a slightly more pronounced increase. Managerial implications: Our results underscore the necessity for firms to reassess indirect dependencies beyond their first-tier suppliers, and also highlight the complex dynamics of global supply chain responses to bilateral trade disputes.

Most prior academic research examines how firms respond to a single tariff episode. Yet firms increasingly operate in an environment characterized by recurring tariff shocks. Whether successive tariff episodes lead firms to continue diversifying their supply chains or instead prompt a different mode of adaptation remains largely unknown. We study how U.S. importing firms reconfigure their global supply chains across two major tariff episodes: Trade War 1.0 in 2018 and Trade War 2.0 in 2025. Using firm-product-level import transactions from Panjiva matched with Compustat, we track changes in sourcing locations, supplier networks, and shipment flows. We first show that both tariff episodes divert sourcing away from China toward a similar set of alternative countries. However, the magnitude of reallocation is substantially weaker during the second episode, and the nearshoring shift toward North America that emerged in the first episode is largely absent. We then document a fundamental shift in firms’ adjustment behavior across episodes. The initial tariff episode induces broad-based diversification: firms expand the number of sourcing countries and suppliers while reducing average shipment volumes per supplier, consistent with an explore-and-test response under uncertainty. In contrast, the repeated tariff episode does not further broaden supplier networks. Instead, firms reduce the number of active suppliers and concentrate sourcing within networks established during the first episode. Moreover, supply chain reconfiguration following the second episode occurs more rapidly and is driven primarily by supplier exits rather than new supplier entry. This pattern suggests that firms draw on knowledge accumulated during the first trade war to make more targeted and decisive adjustments. The consolidation effect is particularly pronounced for differentiated products, where coordination-intensive inputs are less amenable to fragmented supplier networks. Repeated tariff episodes do not lead to further diversification. Rather, an initial episode prompts firms to build supply chain optionality by expanding their sourcing networks, whereas subsequent episodes trigger selective pruning and consolidation within those expanded networks. These findings offer guidance for managers seeking to design resilient global supply chains in an era of recurring trade-policy uncertainty.