Abstract
ABSTRACT Vertical exchange partners, both customers and suppliers, are key sources of knowledge about new components, technologies, and markets, exerting a critical influence on firms’ innovation performance. While firms’ reliance on a few suppliers and/or a few customers has become a regularly occurring phenomenon, there is only an insufficient understanding of the effect of vertical partner concentration on the returns to firms’ R&D investments. Building on transaction cost and evolutionary economics theories, we conjecture that vertical partner concentration negatively moderates the relationship between R&D investments and innovation performance. Our analysis is built on a dataset of 768 R&D-active French manufacturing firms derived from two independent and temporally separated surveys, enabling the use of lagged values of the key independent variables. The results reveal that customer concentration, whether accompanied or not by supplier concentration, weakens the positive relationship between R&D investment and innovation performance, but this is not observed in dynamic industry settings.
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