05/02/2026 - 12:45 -Doyen 22

Alessandro Ferrari

(UPF)

will give a presentation on 

Specialization, Complexity, and Resilience in Supply Chains

Abstract

Despite growing policy interest, the determinants of supply chain resilience are still not well understood. We propose a new theory of supply chain formation in which only compatible inputs can be used in final production. Intermediate producers choose how much to specialize their goods, trading off higher value against a smaller pool of compatible final producers. We model supply chains as complex production processes requiring multiple complementary inputs. Specialization choices, production complexity, disruption frequency, and search frictions jointly determine supply chain resilience, that is, the speed at which final production recovers after a disruption. In equilibrium, production inputs are over-specialized due to a novel network externality: intermediate producers fail to internalize how their specialization choices affect the likelihood that final production takes place, and thus the unrealized value created by complementary inputs when it halts. As a result, supply chains are more productive in normal times but less resilient than socially desirable. A lump-sum subsidy to active final producers can decentralize efficient resilience in supply chains, and compatibility standards are generally welfare-enhancing.

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