The effect of customer concentration on supplier sustainable growth: evidence from China

Abstract

Due to the worldwide pandemic and ‘Stay at Home’ order, many firms have experienced challenges for supply chain management. As the key parts of supply chain management, customer concentration may have a detrimental or beneficial effect on supplier sustainable growth. Using a large sample of listed firms in China, we explore the effect of customer concentration on supplier sustainable growth. This study documents that customer concentration is negatively related to supplier sustainable growth and the adverse effect is salient when a supplier is not under government protection. Further analyses demonstrate that the results are robust to alternative measures and controlling for endogeneity problems. Finally, the path analysis shows that the adverse effect is partially driven by lowering innovation and increasing administration costs in supplier firms, suggesting that innovation and administration costs play a mediating role in the relationship between customer concentration and supplier sustainable growth.