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Customer concentration and over-investment

Author

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  • Haomin Zhang
  • Zhijun Lin
  • Ming Liu
  • Kai Wang

Abstract

This paper investigates the impact of customer concentration on a supplier firm’s over-investment behaviour. Based on a large sample analysis on the US market, we find that a supplier firm with higher degree of customer concentration is likely to over-invest beyond the optimal investment level determined by investment opportunities. We also reveal that the positive association between customer concentration and over-investment weakens when the largest customer is a government entity, when the duration of supplier–customer relationship extends, and when the supplier firm captures larger market shares in its industry.

Suggested Citation

  • Haomin Zhang & Zhijun Lin & Ming Liu & Kai Wang, 2020. "Customer concentration and over-investment," Applied Economics, Taylor & Francis Journals, vol. 52(46), pages 5035-5045, October.
    • Handle: RePEc:taf:applec:v:52:y:2020:i:46:p:5035-5045
    DOI: 10.1080/00036846.2020.1752901
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    Cited by:

    1. Wang, Xiaokun (Cara) & Kim, Woojung & Holguín-Veras, José & Schmid, Joshua, 2021. "Adoption of delivery services in light of the COVID pandemic: Who and how long?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 154(C), pages 270-286.
    2. Mahla Afghahi & Farzaneh Nassirzadeh & Davood Askarany, 2024. "Exploring the impact of customer concentration on stock price crash risk," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-15, December.

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