The impact of supply chain concentration on integration and business performance

Abstract

Although supply chain integration is critical to enhancing business performance, achieving effective integration with major suppliers and customers remains a challenge. While current scholarship suggests supply chain integration can be enabled by concentrating business to a few major suppliers and customers, scholars have yet to reach a consensus on this effect. We address this gap by examining the impact of supply chain concentration on integration and business performance with the consideration of the contingent role of environmental turbulence. Using archival and matched survey data from 1008 senior managers of 336 firms collected at two points in time, we find supplier concentration does not have a significant effect on supplier integration while customer concentration has a positive effect on customer integration. We also find market turbulence weakens the concentration-integration relationship for both supplier and customer sides while technological turbulence strengthens it. Supplier and customer integration have significantly positive effects on business performance. Our study offers a comprehensive view for achieving integration with major suppliers (customers) via the management of supplier (customer) concentration to improve business performance.