Supplier concentration, market power and R&D investment

This paper examines the relationship between supplier concentration and R&D investment of Chinese firms using the sample of all A-share listed companies on the Shanghai Stock Exchange and Shenzhen Stock Exchange from 2008 to 2015. Empirical results present the significant negative relationship between supplier concentration and firms' R&D expenditure. Further analysis indicates that the weaker the firm's market power, the stronger the negative impact of supplier concentration on the firm's R&D investment. This paper enriches corporate R&D investments, supply chains, and market power literature. As developing countries deepen their participation in global supply chain networks and transform through technological upgrading, the findings of this paper have important practical implications for developing country firms to overcome R&D resistance and for policymakers to lead industrial development.

Automated summary

This study examines the relationship between supplier concentration and R&D investment of Chinese firms. The empirical results reveal a significant negative relationship between supplier concentration and firms' R&D expenditure, and the negative impact of supplier concentration on R&D investment is stronger for firms with weaker market power. This paper enriches the literature on corporate R&D investments, supply chains, and market power, and has important practical implications for developing country firms and policymakers.