The Structural and Executional Components of Customer Concentration: Implications for Supplier Performance

Abstract

ABSTRACTWe examine how suppliers' structural decisions (strategic choices regarding scale, scope, and complexity) and executional skills (drivers that support the day-to-day operations of the firm) influence its customer base concentration and, in turn, supplier performance. We investigate our research question through an in-depth study of suppliers in the apparel industry. We find that suppliers' structural decisions have an important relation to the level of a supplier's customer concentration. However, we find little evidence that the component of concentration arising from structural decisions is associated with supplier performance (both financial and operational). Instead, the favorable relation between supplier performance and suppliers' customer concentration is primarily driven by the component of concentration arising from suppliers' executional skills. Our evidence indicates that greater customer concentration in and of itself does not relate to the anticipated benefits and risks, which has implications for our understanding of how concentration impacts suppliers.Data Availability: All data are publicly available from the sources indicated in the text.