Investigating the relationship between inventory stickiness and firm performance

In today's competitive world, an inventory management approach that, in addition to agility, is in line with demand and does not impose heavy costs on organizations, is essential. Inventory sticky management approach, which, contrary to the common approach in the new world, leads to inventory stickiness in periods of declining revenue, has costs for organizations that are expected to undermine performance organizations and impose additional costs on them. In this research, this important issue, which is a new topic in the domestic literature, has been examined.

To test the hypothesis of this research, 7,597 observations (year-firm) were collected and examined from the pooled data, which according to the definition of variables, only 3,975 observations between 2005 to 2020 remained and were used in the hypothesis test.

The results show that on average, Iranian companies have followed the approach of sticky inventory management in periods of declining revenues, which on average has led to costs for companies and a negative effect on company performance.

The analysis of the hypothesis of this research in the whole market and different industries shows that the costs of sticky inventory management outweigh the benefits for companies and has a negative effect on the performance of companies in most industries. There is no doubt that maintaining inventory has benefits given the macroeconomic conditions of the country, but the results of this study show that in the period of this research, the costs incurred are probably more than the benefits of this strategy and the opposite effect. However, the analysis of industries and the analysis of the strengths, weaknesses, opportunities and threats of each of them in terms of inventory maintenance is a subject that requires separate research.