A second, important measure of effectiveness is the overall business performance of a
company. It may refer to different areas of outcomes, e.g. financial, product-market, and
shareholder-return related areas (Richard et al., 2009). Financial investments have to be
made to become agile and/or robust. It is of particular interest, if the implementation of
agility and/or robustness is beneficial for financial outcomes of a firm. Therefore, this
research is concentrated on financial performance aspects when examining the impact of
these management strategies on business performance. Ju¨ ttner et al. (2003) argue that
there is a trade-off between the extra costs related to risk management strategies and the
total costs of supply. That is, investments in agility and robustness incur additional
costs which have to pay out in terms of improved business performance. Hendricks and
Singhal (2005) empirically investigate the association between supply chain glitches
(e.g. parts shortages) and various performance indicators. They find that firms who
experience glitches report on average lower sales growth, higher increases in cost, and
higher increases in inventories. This indicates that a proactive management strategy
(i.e. robustness) is necessary in order to prevent supply chain glitches from occurring,
which, in turn, helps to prevent deteriorating business performance. After risks have
occurred, it is also important to be reactive (i.e. agility) to bring the supply chain “out of
harm’s way” as fast as possible, which, in turn, helps to get business performance under
control again. It is thus hypothesized: