Blockchain and the Value of Operational Transparency

Gerry Tsoukalas, Operations, Information and Decisions, The Wharton School; Jiří Chod, Carroll School of Management; and Nikos Trichakis, MIT Sloan School of Management

Abstract: The project aims to explore the extent to which blockchain technology can be ported to alleviate information asymmetry issues in the context of supply chain financing. In particular, firms seeking the capital needed to efficiently run their operations are often impeded by severe information asymmetry issues: unable to readily ascertain their fundamental operational capabilities and gauge their risk, prospective lenders frequently command prohibitively high financing rates, which lead to operational distortions and/or market breakdown. Information asymmetry can be especially problematic for small and medium-sized enterprises (SMEs), and startups in particular, which are likely to be engaged in innovative operations and lack track record and reputation. In this early stage of the technology life cycle, we seek to address three questions:

  1. To what extent can blockchain be successfully ported from the digital to the physical world, i.e., to provide verifiability of physical goods transactions in supply chains?
  2. How could firms then leverage such transaction verifiability to efficiently signal their fundamental operational capabilities to lenders?
  3. What types of firms or supply chains would stand to benefit the most from this use of blockchains and how?

Michelle Eckert is Marketing and Communications Coordinator for the Mack Institute, where she works to engage students, researchers, and corporate partners in opportunities for collaboration. Michelle received her B.A. in Art from Valparaiso University in 2007. Her background includes two AmeriCorps terms of service working to teach mathematics, computer literacy, and job readiness skills to out-of-school youth in Philadelphia, focusing particularly on promoting access to post-secondary education.