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Customer Concentration and Corporate Innovation: Effects of Financing Constraints and Managers’ Expectation of Chinese Listed Companies

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  • Bing Zhou

    (Research Center for Economy of Upper Reaches of the Yangtse River/School of Accounting, Chongqing Technology and Business University, Chongqing 400067, China
    Business School, Southwest University of Political Science and Law, Chongqing 401120, China)

  • Yumeng Li

    (Research Center for Economy of Upper Reaches of the Yangtse River/School of Accounting, Chongqing Technology and Business University, Chongqing 400067, China)

  • Shengzhong Huang

    (Business School, Southwest University of Political Science and Law, Chongqing 401120, China)

  • Sidai Guo

    (Sichuan Province Circular Economy Research Center, Southwest University of Science and Technology, Sichuan 621010, China)

  • Bing Xue

    (Sichuan Province Circular Economy Research Center, Southwest University of Science and Technology, Sichuan 621010, China)

Abstract

Innovation capability of enterprises will greatly influence the current and future development of companies. This paper investigates the relationship between customer concentration and innovation capability of enterprises through the view of both the financing constraints and the expectation of managers. Based on the data of China’s A-share listed companies over the period from 2012 to 2016, several methods including system GMM, threshold model of fixed effects, and PSM are applied for empirical analysis. The results show that the innovation capability of listed companies in China are negatively correlated with the customer concentration. Higher customer concentration brings about stronger constraints from large customers on enterprises and greater dependence of enterprises on large customers, which result in weaker demand for innovation and lower investment in innovation. Meanwhile, the results demonstrate the double-threshold effect of financing constraints. The effect of customer concentration on innovation can be different in companies with low, medium, or high-financing constraints. Furthermore, optimistic expectations are more conducive to the reduction of customer concentration and the improvement of innovation. In addition, based on the perspective of the manager’s expectation, the research demonstrates the heterogeneous impact of manager’s expectation on the relationship between customer concentration and innovation capability.

Suggested Citation

  • Bing Zhou & Yumeng Li & Shengzhong Huang & Sidai Guo & Bing Xue, 2019. "Customer Concentration and Corporate Innovation: Effects of Financing Constraints and Managers’ Expectation of Chinese Listed Companies," Sustainability, MDPI, vol. 11(10), pages 1-19, May.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:10:p:2859-:d:232654
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    References listed on IDEAS

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    2. Obaid Ur Rehman & Xiaoxing Liu & Kai Wu & Junfeng Li, 2023. "Customer concentration, leverage adjustments, and firm value," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(2), pages 2035-2079, June.
    3. Chang Huang & Xiao Chang & Yang Wang & Nicolas Li, 2023. "Do major customers encourage innovative sustainable development? Empirical evidence from corporate green innovation in China," Business Strategy and the Environment, Wiley Blackwell, vol. 32(1), pages 163-184, January.
    4. Huan Chen & Tingyong Zhong & Jeoung Yul Lee, 2020. "Capacity Reduction Pressure, Financing Constraints, and Enterprise Sustainable Innovation Investment: Evidence from Chinese Manufacturing Companies," Sustainability, MDPI, vol. 12(24), pages 1-16, December.
    5. Tingyong Zhong & Yimeng Zuo & Fangcheng Sun & Jeoung Yul Lee, 2020. "Customer Concentration, Economic Policy Uncertainty and Enterprise Sustainable Innovation," Sustainability, MDPI, vol. 12(4), pages 1-20, February.

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