Week 2 -Tae et al-Sidd Bhattacharya

Two perspectives have been persistent in previous research. One, says that in the face of disruption the reactive ability of firms determine how much superior profits it can garner until a new equilibrium is reached. Two, that firms are more interconnected than ever before often sharing and utilizing each other’s resources and inputs. This paper asks the research question of how operation disruption of firms which is dependent on shared resources affects not just the disrupted firm but also other firms that are sharing the resource. Further, the paper wants to investigate whether this effect is moderated by the routine complexity of the firm who is disrupted and also their own routine complexity. The context of the research is the US airline industry and especially episodes of major disruption (37 between 2000-2017 out of which 4 major ones are taken into account here). The shared resource is the airports while the performance data is gathered from BTS On-time Performance(OTP).The paper uses simple OLS specification while trying to measure the departure delay, arrival delay and excess travel times as measures of on-time performance. With a data set of 75,051 flights during the 4 disrupted periods, the paper finds that disruptions to one airline may have negative effects on the on-time performance of competitors who share the same resource. Further, results indicate that when FSCs ie those with more complicated routines are disrupted there are significant and negative spillovers onto competing LCCs and FSCs. These results reverse when LCCs are disrupted with positive performance improvements. The analysis section does extensive robustness checks to ensure robust identification. The research has important implications for both firms, IT designers and regulators. The research also contributes to the literature by being the first to show the effect of focal firm’s disruption on competitors with whom it shares resources.