Geopolitics and governance of global economies

ESCP Observatory

Roberto Tubaldi, ESCP Business School: 'Resilient governance of global supply chains safeguards competitiveness'

In today's complex times, amid geopolitical tensions and conflicts such as those in the Middle East and Ukraine, according to Roberto Tubaldi, Assistant Professor of Finance at the ESCP Business School at the Turin campus, a "more diversified, more transparent" supply chain is crucial to "reduce the variability of input costs and the likelihood of rationing in times of stress"

by Giorgia Colucci

29 May 2026

5' min read

Translated by AI

Versione italiana

5' min read

Translated by AI

Versione italiana

(Il Sole 24 Ore Radiocor) -supply chains have become increasingly central in recent years. Indeed, "globalisation has made it possible to build long and specialised value chains, capable of cutting costs and sustaining higher margins". However, the conflicts in the Middle East and Ukraine, geopolitical tensions and the Covid-19 pandemic 'have made the hidden costs of those architectures evident' and the need to take action to improve and strengthen them. This was explained in an interview with Radiocor Roberto Tubaldi, Assistant Professor of Finance at ESCP Business School on the Turin campus, who argues that a 'more resilient, more diversified, more transparent' supply chain is essential to 'reduce the variability of input costs and the likelihood of rationing in times of stress'.

Moreover, supply chain shocks leave a significant imprint on the industrial structure, as illustrated by the research Supply Chain Shortages, Large Firms' Market Power, and Inflation - on which Tubaldi is working with Francesco Franzoni of USI Lugano and Swiss Finance Institute and Mariassunta Giannetti of the Stockholm School of Economics. Suffice it to say that as a result of a supply chain shortage in 2021, larger companies have gained a competitive advantage due to their diversified supplier networks and greater bargaining power. And the effects are long-lasting: the share gains gained by companies that manage to continue serving their customers during shortages are largely permanent, while the pressure on margins recedes once supply is normalised,' explains the expert. A robust supply chain therefore protects not only the short-term profit and loss accounts, but also the long-term competitive position.

Roberto Tubaldi, Assistant Professor of Finance dell’ESCP Business School presso il campus di Torino

Supply chain at the heart of governance

However, disruptions in the supply chain do not only have operational effects. "Supply chain configuration choices - vertical integration, diversification of sources, sizing of strategic inventories - profoundly change the exposure to operational risk and, as a consequence, the cost of capital and enterprise value," Tubaldi explains. Therefore, they should be assessed on the boards' agenda with 'the same rigor reserved for investments in fixed assets'. In addition to this, there is also a regulatory push. "The European Corporate Sustainability Reporting Directive (2022) introduces the principle of dual materiality, which obliges large companies to report not only on their environmental and social impacts, but also on how vulnerabilities in the supply chain create measurable financial risks for the company itself," says the professor.

Moreover, supply chain governance is not just a reputational issue, but a real fiduciary duty. In fact, 'institutional investors are increasingly considering a company's ability to oversee its supply chain as a direct indicator of the quality of risk management, with consequences for the premium charged and the cost of capital,' says Tubaldi. Redundancy and diversification are no longer inefficiencies to be minimised, but recognised components of corporate value.

Interruptions create asymmetries

However, to fully understand the importance of supply chains and their possible criticalities, we need to take a step back and look at the most critical moments, and the asymmetries, that disruptions create within the market. "When a supplier cannot satisfy the entire demand, he necessarily has to decide who to serve and who to ration,' Tubaldi explains. The logic with which this decision is made is not random'. As emerges from the study conducted by the professor with colleagues Franzoni and Giannetti - an analysis based on millions of sea shipments to US customers and the mapping of customer-supplier relations in over seventy countries - in times of scarcity, suppliers systematically favour customers who weigh most heavily on their revenues. These are not necessarily the largest 'in absolute size', the expert points out, but those with the greatest relative weight in the supplier's customer portfolio.

The reason is mainly relational: 'losing an important customer destroys a much higher continuation value than that associated with losing a marginal customer'. However, this choice, although forced, has consequences. In fact, "those who are 'important' customers of their supplier suffer lower cost increases, retain or increase market share and, in sectors with less elastic demand, are able to raise selling prices". In addition, there are other factors that enable larger companies to better withstand periods of crisis. 'Firstly, the diversification of the supplier base reduces dependence on a single point of failure,' says Tubaldi. Then larger companies have "the ability to absorb safety stocks - inventories, long-term contracts, booked capacity agreements - and to sustain temporary price increases thanks to easier access to credit". Finally, 'vertical integration and economies of scope make it possible to internalise certain links in the supply chain or to substitute inputs between divisions'.

A change of conditions

This dynamic has taken place over the last five years. In addition to a significant increase in market share and profitability, the companies that are most important to their suppliers have also recorded 'measurable gains over competitors in the same sector' in the stock market. Moreover, "in the most concentrated sectors, supply tensions produced inflationary pressures almost 40 per cent more intense than in the others," Tubaldi explains. Looking then at the economy as a whole, "the mechanism of favouritism in supply chains explains about one-fifth of consumer inflation in the United States in 2021 - a far from negligible contribution to the inflation experienced by American households that year". And it is precisely from these numbers that the debate on so-called greedflation should be framed.

In reality, as Tubaldi points out, greed 'is not an operational category. Capitalist firms always maximise margins according to market conditions'. What has fuelled the inflation of 2021-2022 is therefore not 'a change in preferences', but one 'of market conditions' that, albeit temporarily, have conferred pricing power on those who were able to take delivery. In this case, 'smaller competitors - more exposed to rationing, less covered by long-term supplier relationships - were temporarily put out of business'. Precisely this left the 'important' customers the possibility of raising prices without fear of erosion of market share'. It must also be considered that even when bottlenecks are reabsorbed, competition resumes, profit margins return, and 'the market shares gained remain'.

The implications for economic policy

"On the monetary policy side, if the dominant mechanism of supply chain inflationary pressures is supplier favouritism towards larger customers, aggressive monetary tightening may produce undesirable side effects. In a nutshell, high interest rates make the financial constraints of smaller firms tighter, risking further reducing competition - which would otherwise squeeze profit margins - and accentuating the asymmetries that fuel price increases. This 'does not mean that the central bank should stand still,' says the professor, 'but that, in the presence of supply chain shocks, the effectiveness of a tightening is less than what would be observed in the face of demand shocks, and its distributional effects on the industrial structure must be carefully assessed'.

In any case, "removing bottlenecks" with "investments in port capacity and intermodal logistics or stock replenishment programmes for critical inputs, from semiconductors to active pharmaceutical ingredients," the expert says, is key to containing the inflation associated with supply chain shocks. Furthermore, policymakers should take into account that 'supply chain shocks tend to permanently increase industrial concentration, market shares gained during shortages remain even after supply normalisation'.