Supplier concentration and corporate innovation input

Abstract

This paper studies the relationship between supplier concentration and corporate innovation input. The results show that a firm with a higher supplier concentration tends to have lower R&D investments and invention patents. Considering endogenous problems, this negative relationship is still robust by using the instrumental variable regression and propensity score matching method. Mechanism analysis shows that a firm with higher supplier concentration is impaired risk-taking capacity and occupied resources by the big suppliers. Our evidence shows that a deeper exposure to a small set of large supplier bears negative consequences for the firm. This paper sheds new light on the dark side of a high level of supplier concentration on corporate innovation.