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

Bing Zhou, Yumeng Li, Shengzhong Huang, Sidai Guo and Bing Xue
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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
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

Sustainability, 2019, vol. 11, issue 10, 1-19

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.

Keywords: customer concentration; innovation of enterprises; dynamic panel; threshold model; China (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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