Economic costs of firm‐level information infrastructure failures

Abstract

Purpose This paper presents a method for estimating the macro‐economic cost of a firm‐level information system disruption within a supply chain. Design/methodology/approach The authors combine field study estimates with a Leontief‐based input‐output model to estimate the macro‐economic costs of a targeted internet outage that disrupts the supply chain. Findings The authors find that supply chain vulnerability or resiliency to cyber disruptions is not necessarily dependent on the types of technology employed, but rather how the technology is used to enable supply chain processes and the type of attack experienced. The authors find that some supply chains like oil and gas could be significantly impacted by certain cyber disruptions. However, similar to other causes of supply chain disruptions such as labor disputes or natural disasters, the authors find that firms can be very resilient to cyber disruptions. Research limitations/implications The validity of the approach is limited by the accuracy of parameters gathered through field studies and the resolution of government economic data. Practical implications Managers should examine how information technology is used to enable their supply chain processes and develop capabilities that provide resilience to failures. Lean supply chains that focus on minimizing inventory may be more vulnerable to major information system failures unless they take special steps to build resilience. Originality/value This paper provides a new approach to estimating economic vulnerability due to supply chain information failures.

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