Resilient and Innovative Supply Chains: Evidence-based policy and managerial implications

The aims of this paper are threefold. First, we discuss how resilient and innovative supply chains and knowledge networks can be constructed, mostly based on papers from current and previous projects at RIETI. The role of geographic diversity across partner countries in supply chains and knowledge networks is particularly emphasized. Second, we overview the recent policies affecting global supply chains and trends in the supply chains of major countries from the viewpoint of diversity. It is particularly observed that the reliance on China in imports of intermediate products to many countries in Asia has increased substantially. Although the reliance of Japan on China recently declined to some extent, it is still high compared with that of the United States and European countries. Finally, policy and managerial suggestions are provided based on the academic evidence in the first part and the current observations in the second part. It is suggested that Japan should lower its reliance on China in supply chains and diversify supply chains internationally to countries without national security concerns (i.e., “friend-shoring”) for resilience, and it should also expand knowledge networks among such countries to increase innovation.

This is the English version of the Japanese Policy Discussion Paper (22-P-019) with some additional information and changes.