Risk Propagation in Interconnected Supply Chain Networks of Developed and Developing Countries

Abstract

Global supply chains are increasingly shaped by interdependencies between developed and developing countries. While developed economies dominate in technology-intensive and capital-intensive industries, developing economies play critical roles in resource supply and manufacturing. Such interconnections, while enabling efficiency gains, also amplify systemic vulnerability. This paper develops a dual-layer network model to investigate risk propagation across supply chain structures linking developed and developing countries. The upper layer represents the developed-country supply chain network with small-world or scale-free characteristics, while the lower layer captures the developing-country supply chain network with more random or hierarchical properties. Using epidemic contagion dynamics, the model analyzes risk diffusion within and between the two layers under varying conditions of infection rate, recovery rate, and coupling strength. Simulation results reveal asymmetric patterns: risks originating in developed-country networks spread quickly due to high connectivity but stabilize within smaller clusters, whereas risks originating in developing-country networks spread more broadly, threatening systemic collapse. The overlap rate between layers—representing trade dependency—critically determines systemic resilience: moderate coupling enhances mutual support, while excessive coupling amplifies systemic risk. The findings provide theoretical insights for global supply chain resilience and policy guidance for managing cross-border systemic risks.