The effect of supplier CSR on customer–supplier relationship

The paper studies how corporate social responsibility (CSR) helps suppliers mitigate customer concentration risk. Using a sample of customer–supplier pairs of U.S. public firms, we find that suppliers with greater CSR performance have a stronger relationship with their major customers, in terms of higher sales and lower termination likelihood. Moreover, following disruptive events at major customers, suppliers with weak CSR performance experience sales loss, termination likelihood increase, and negative market reaction, while suppliers with strong CSR performance are largely immune from these adverse shocks. Finally, we show that the positive impact of supplier CSR on customer relationship is more pronounced when the supplier has less bargaining power in the relationship. Overall, our findings suggest that CSR can be employed by suppliers as a precautionary way to reduce customer concentration risk.