Customer concentration and supplier financial performance: An inverted U-shaped relationship

Previous studies have reported mixed findings regarding the impact of customer concentration on supplier financial performance. Drawing on the relational view and the resource dependence theory, this study theorizes that customer concentration generates both relational rents (benefits) and exchange hazards (costs) and they jointly determine the net effect of customer concentration. Using 1040 Chinese listed manufacturing firms as a sample, this research provides empirical evidence that customer concentration has an inverted U-shaped relationship with supplier financial performance. This effect is stronger when the supplier has more intangible assets, when major customers are located more dispersedly, and when industry competition is more intense. These results reconcile the inconsistent views on the effect of customer concentration in the literature and provide insightful managerial guidelines for managers to better design their customer base.

Automated summary

This study draws on the relational view and the resource dependence theory to examine the impact of customer concentration on supplier financial performance. Empirical evidence from 1040 Chinese listed manufacturing firms suggests an inverted U-shaped relationship between customer concentration and supplier financial performance. This relationship is influenced by factors such as intangible assets, customer dispersion, and industry competition.