Variations of the Bullwhip Effect Across Foreign Subsidiaries.

This article investigates variations in the bullwhip effect—defined as the amplification of order variability relative to demand variability—across foreign subsidiaries of Korean multinational firms and examines how country-specific and subsidiary-specific factors influence it. Using a unique panel data set from 2006 to 2013 that includes detailed purchase information for subsidiaries in over 70 countries, the study proposes an alternative bullwhip measure based on the ratio of purchase volatility to demand volatility, which differs significantly from the traditional production-based measure and better captures the effect. Empirical results show that higher foreign wage levels, greater political stability, and increased import penetration in host countries reduce the bullwhip effect, while longer import distances and higher international transportation costs increase it for import-intensive subsidiaries. Additionally, subsidiaries with a high proportion of intrafirm sales exhibit lower bullwhip effects when managed by more expatriate managers or wholly owned by the parent firm, suggesting that stronger parent-subsidiary integration mitigates demand amplification. These findings offer multinational managers insights into supply chain coordination strategies, emphasizing the trade-offs between cost reduction and supply chain variability in global operations.