Strategic Trade-Offs in Forward and Backward Integration: Evidence of Organizational Resilience from Systemic Supply Chain Disruptions

Fen Wu (), Jing Zhu and Qinghong Xie
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Fen Wu: Institute of Western China Economic Research, Southwestern University of Finance and Economics, Chengdu 611130, China
Jing Zhu: Institute of Western China Economic Research, Southwestern University of Finance and Economics, Chengdu 611130, China
Qinghong Xie: Institute of Western China Economic Research, Southwestern University of Finance and Economics, Chengdu 611130, China

Sustainability, 2025, vol. 17, issue 20, 1-32

Abstract: In an increasingly uncertain business environment, developing organizational resilience to cope with supply chain disruptions is crucial for firms aiming to achieve sustainable growth. This study investigates how forward and backward vertical integration influence organizational resilience in the face of large-scale supply chain disruptions, with particular attention to the moderating role of a firm’s position in the supply network. Drawing on a comprehensive dataset of 2931 publicly listed Chinese firms, we integrate the relational view and information processing theory to examine how integration strategies affect two key dimensions of resilience: organizational stability and flexibility. Our results show that backward integration enhances both stability (reducing the severity of loss by about 17%) and flexibility by accelerating recovery, especially benefiting downstream firms in terms of stability and upstream firms in terms of flexibility. In contrast, forward integration is associated with reduced stability (raising the severity of loss by about 7%) but enables faster recovery for firms closer to end markets. Moreover, we find that the effectiveness of vertical integration depends on organizational context and alternative resilience mechanisms. These findings highlight the importance of aligning integration direction with supply chain position to optimize resilience. By disentangling the distinct strategic trade-offs of forward versus backward integration, this study advances theoretical understanding and offers practical guidance for firms seeking to strengthen their capacity to withstand and recover from systemic shocks.

Keywords: integration strategy; organizational resilience; sustainable development; supply chain position; systemic disruption (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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