Customer-supplier Relationships Research Articles

The role of supplier-customer relationships in the value chain in times of crisis

The role of supplier-customer relationships in the value chain in times of crisis

Does common institutional ownership mitigate hold‐up problems along the supply chain?

AbstractWe show that common institutional ownership (CIO) along the supply chain mitigates hold‐up problems faced by supplier–customer relationships resulting from incomplete contracts. Suppliers make more relationship‐specific investments (RSIs) measured by R&D and patent filings toward their customers that share common institutional investors. Such effect is stronger as the CIO network between a supplier and customer pair becomes wider and deeper. We establish causality by exploiting exogenous shocks to CIO using a broad sample of mergers between financial institutions and further find the CIO effects on suppliers’ innovation specificity are stronger for those who ex ante face severer hold‐up concerns. Lastly, we provide evidence that CIO involvement increases the combined valuations of supply chain pairs (mainly for customers). Our work sheds light on the hold‐up mitigation effect of CIO on firms’ decision to make RSIs along the supply chain.

The effect of supplier CSR on customer–supplier relationship

The paper studies how corporate social responsibility (CSR) helps suppliers mitigate customer concentration risk. Using a sample of customer–supplier pairs of U.S. public firms, we find that suppliers with greater CSR performance have a stronger relationship with their major customers, in terms of higher sales and lower termination likelihood. Moreover, following disruptive events at major customers, suppliers with weak CSR performance experience sales loss, termination likelihood increase, and negative market reaction, while suppliers with strong CSR performance are largely immune from these adverse shocks. Finally, we show that the positive impact of supplier CSR on customer relationship is more pronounced when the supplier has less bargaining power in the relationship. Overall, our findings suggest that CSR can be employed by suppliers as a precautionary way to reduce customer concentration risk.

Green supply chain management for carbon accountability

As disclosure mandates shift their focus towards supply chain carbon accountability, firms are compelled to enhance carbon outcomes throughout their supply chain. The literature suggests that green supply chain management (hereafter, GSCM) plays an essential role in enhancing firms' environmental performance. However, there is a dearth of evidence on the possible informational effects of GSCM on Scope 3 carbon outcomes despite their mutual linkage to supply chains. Using two novel measures of GSCM quality, defined as the extent to which environmental objectives are integrated into supply chain management processes, we find that higher GSCM quality increases the likelihood of a focal customer's Scope 3 carbon disclosures and reduces its Scope 3 carbon footprint. These effects of GSCM quality are realized through improvements in relational trust among customer-supplier relationships and in suppliers' environmental innovation capabilities. Further analysis reveals that the effects of GSCM quality are realized among durable customer-supplier relationships. We identify GSCM quality as an essential and distinct component of corporate environmental governance. These findings highlight the importance of GSCM quality for attaining supply chain carbon transparency and accountability.

Financial distress, bank branching deregulation, and customer-supplier relationships

The paper exploits the deregulation of interstate bank branching laws to examine whether improved access to bank credit for customer firms affects the probability of their suppliers' financial distress. The study provides robust evidence that suppliers' financial distress risk is lower when the states of their major customer firms experience bank branching deregulation. Furthermore, the study shows that customers establish new bank relationships and improve liquidity conditions, while suppliers offer less trade credit to customers, reduce leverage, and increase capital expenditures following customer state's bank branching deregulation. The effect of customers' improved access to credit on suppliers' distress risk is more pronounced for supplier firms with stronger customer-supplier relationships, for financially constrained suppliers, and for suppliers whose customers are financially unconstrained. Overall, the findings highlight the importance of customers' access to credit on the financial distress risk of their suppliers.

Strategic alignment between supply chain partners and cost stickiness of suppliers

AbstractWe investigate the relationship between strategic alignment between suppliers and their major customers and the asymmetric behavior of costs, specifically cost of goods sold (COGS) and selling, general, and administrative (SG&A) costs. Utilizing mandated disclosures regarding major customers from 1978 to 2018, we construct supplier–customer dyads to examine this connection. Our results indicate a positive association between strategic alignment in supply chain partnerships and the stickiness of COGS and SG&A costs for suppliers. This positive association is more pronounced for suppliers in the early stages of their relationships than those with long-term partnerships. Additionally, strategic alignment increases the stickiness of suppliers’ research and development (R&D) costs. Furthermore, we observe that strategic alignment correlates with an extended duration of supplier–customer relationships and improved supplier performance. Our findings hold across alternative constructs of strategic alignment, various supplier strategy types, and when accounting for characteristics of the supply-chain relationship.

Directors with supply chain experience as heterogeneous network pipes: how does it affect M&A efficiency

PurposeThe link between interlocking directors and mergers and acquisitions (M&A) efficiency has been analyzed in an information asymmetry environment. Despite an abundance of evidence highlighting that interlocking directors do contribute to M&A efficiency in an acquirer-target binary relationship, the target is embedded in a complex network of supplier-customer relationships, which implies that the acquirer needs to consider the value of suppliers, distributors and retailers in the target’s supply chain in improving M&A efficiency. Through the lenses of acquirer-target multivariate relationships, this paper aims to examine how directors with supply chain experience (DSCs) act as heterogeneous network pipes to affect M&A efficiency.Design/methodology/approachUsing a sample of 311 A-share listed firms on the Shanghai and Shenzhen stock exchanges in China during 2011–2020, this paper investigates the relationship between DSCs and M&A efficiency by using ordinary least squares (OLS) regression.FindingsThrough empirical research, we verify a negative relationship between DSCs and M&A duration and an inverted U-shaped relationship between both DSCs and M&A performance, revealing the complexity of the relationship between experience and efficiency. Furthermore, drawing on upper echelon theory, the information value of DSCs will be greatly reduced when executives have overconfident psychological characteristics, which are mainly shown to negatively moderate the relationship between DSCs and M&A performance. We also conduct multiple robustness tests and supplemental analyses to illustrate the robustness and boundaries of our findings. Finally, DSCs are likely more important in environments among growth and mature firms as well as high-growth industries.Originality/valueWe break through the assumption that interlocking directors contribute to M&A efficiency in an acquirer-target binary relationship and examine the impact of DSCs on M&A efficiency based on micro-empirical evidence from the value of target-related upstream or downstream industries, which extends the connotation of interlocking directors and enriches the study related to factors influencing M&A efficiency.

Impact of Social Media Usage on Supplier-Customer Relationship Management: Case on Manufacturing and Service SMEs

Digital products have placed as a competitive advantage for business actors both individuals, companies, and industries recently. Social media such as Facebook, Instagram, YouTube, which are accessible from various communication media such as smartphones, tablets, or laptops have become inseparable media from user's handholds in order to share information, offer products and services, and make friends. In an effort to establish good relationships between companies and suppliers (Supplier Relationship Management/SRM) and between companies and consumers (Customer Relationship Management/CRM), hence optimizing the use of social media for companies becomes very important, no exception for small and medium-sized enterprises (SMEs). This study aims to examine the role of social media to assist SMEs in establishing good relationships with their suppliers and customers. There are around 200-250 manufacturing and service SMEs domiciled in Central Java province were involved. The data collection method was carried out through surveys guided by questionnaires and interviews with SME owners. Quantitative data analysis was conducted using Structural Equation Modelling. It is hoped that the resulting findings will prove the significant role of social media in helping SMEs to establish good relationships with suppliers (SRM) and customers (CRM), and it is believed to be useful both theoretically and practically.

Customer bargaining power and supplier profitability: the moderating role of product market overlap

PurposeResearch on the relationship between customer bargaining power and supplier performance in supplier–customer relationships has flourished in recent decades. This study aims to empirically investigate whether product market overlap (PMO) in a supply chain moderates the effect of customer bargaining power on supplier profitability.Design/methodology/approachThis study uses large-scale secondary data from multiple databases. Econometric panel data techniques are used to test the hypotheses.FindingsThe results show that PMO in a supplier–customer relationship and PMO in supplier–supplier relationships both exacerbate the negative effect of the bargaining power of customers on supplier profitability.Originality/valueThis study contributes to the field of supply chain management. This study brings new insights into the ongoing debate surrounding the relationship between customer bargaining power and supplier profitability. The study also contributes to the literature on supply chain networks by showing the impact of indirect supply chain relationships.

Supplier concentration and the speed of capital structure adjustment

Using a large sample of A-share Chinese firms from 2012 to 2019, we show a positive relationship between supplier concentration and leverage adjustment speed. This positive relationship is unidirectional and primarily concentrated among over-leveraged firms rather than among under-leveraged ones. Moreover, the effect of supplier concentration is more pronounced in firms with greater bargaining power over suppliers. A plausible channel is the monitoring role imposed by suppliers, which mitigates the firm’s agency conflicts by reducing (1) information asymmetry between informed managers and uninformed market participants and (2) management opportunism and slacking. Further, we show that firms with higher supplier concentrations are more active in the security market due to having lower agency costs. Our findings demonstrate the crucial role of customer–supplier relationships in a firm’s capital structure dynamics.

The ambiguous impact of supplier involvement in product development on supplier relationship resilience and company performance

PurposeI aimed to obtain a deeper insight into the link between supplier involvement in product development (SIPD), supplier relationship resilience and company performance.Design/methodology/approachTo collect data, a survey among 500 Polish manufacturing companies was conducted. I used quantitative methods (structural equation modeling) to test several research hypotheses referring to a single supplier–customer relationship. Thanks to the use of multi-construct measurement of SIPD and supplier relationship resilience, the study provides detailed research results on the topic.FindingsCollaborative practices implemented during SIPD increase procurement flexibility and decrease redundancy in the relationship with the involved supplier. Communication during SIPD increases supplier flexibility and procurement flexibility. Increased supplier flexibility and increased procurement flexibility in the relationship with the involved supplier as well as collaborative practices during SIPD positively impact company performance. I confirmed the indirect effect between communication during SIPD and company performance when the mediators are supplier flexibility and procurement flexibility. Decreased redundancy in relationship with involved supplier does not impact company performance.Practical implicationsSupply chain managers need to rethink SIPD practice to effectively ensure supply chain resilience (SCRES), especially in the face of the contemporary global crisis and black swans affecting the supplier base. My article provides important managerial insights into drivers of SCRES and company performance.Originality/valueTo the best of my knowledge, this research is among the first to conclude that SIPD does not have an unequivocally positive or direct impact on supplier relationship resilience. The research fills the gap by analyzing the impact of SIPD on two main SCRES elements. The study examines supplier relationship resilience, understood as flexibility and redundancy elements, in a single supplier–buyer relationship perspective. Thus, the presented considerations go beyond the traditional understanding of flexibility and redundancy in supplier relationship management, that is through the prism of double or multi sourcing and having back up-suppliers.

Inter-firm relationships and the special role of common banks

Using a novel dataset that combines information on customer-supplier trade relationships with information on firm-bank lending relationships, we show that common banks that lend to firms at both ends of a trade link grow and strengthen such trade relationships. To establish causality, we use bank mergers, which generate exogenous variations in the presence of common banks, and show that common bank relationships between customers and suppliers increase trade relationships by 49.6%. We find that the role of a common bank is greater when it is more informed and when supply chains suffer from larger information and holdup problems. We also document that suppliers with common banks face lower spillover risks from a distressed customer. Overall, our findings show the unique role of banks in driving inter-firm growth and investment by mitigating information and holdup problems, which arguably leads to greater economic growth.

Blockchain and earnings management: Evidence from the supply chain

We investigate whether corporate adoption of blockchain technology is associated with a change in firms' financial reporting behavior. On one hand, the features of blockchain technology (immutability, decentralized consensus, and real-time data sharing) can enhance data integrity, suggesting corporate blockchain adoptions may reduce earnings management. However, despite fast growth in blockchain adoptions, it remains unclear whether improved financial reporting quality or reduced accounting manipulation is a motivating factor in firms' blockchain adoption as firms vary in how they implement this new technology. On the other hand, the hype and/or increased expectations associated with blockchain adoptions, as well as the market's misperception that blockchain adoption could increase data integrity, may incentivize and provide opportunity for firms to upwardly manage earnings. We conduct our tests in the setting of the supply chain, as prior work establishes that shocks to one firm can impact linked firms through customer-supplier relationships. Our empirical evidence supports the latter prediction, as we find robust evidence that supplier firms' earnings management increases after their customers adopt blockchain. This result holds with numerous robustness tests. We provide direct evidence consistent with hype/increased expectations and reduced monitoring of supplier firms. Our findings suggest unintended consequences of blockchain adoption on financial reporting.

Exploring the crossroads between digital servitization and sustainability from a business marketing perspective

In this study, we explored the contingency effects of digital servitization enabled by Industry 4.0 technologies and sustainability from the perspective of business-to-business marketing relationships. Our in-depth analysis of an Italian company showed the extent to which digital servitization can improve customers’ sustainability profiles and could be a lever to address the servitization paradox. However, to capture this sustainability value, companies must transform their supplier–customer relationships. Customer relationship management emerged as a critical element in this sense, especially when highly innovative services were offered.

Do customers’ financial restatements affect how auditors respond to their suppliers? Evidence from China

PurposeThe purpose of this study is to explore the economic impact of financial restatements by major customers on the audit opinion of their suppliers, showing that non-financial information disclosure potentially helps auditors make better assessments.Design/methodology/approachUsing a sample of China’s listed firms from 2007 to 2021, the authors aim to find the relationship between customers’ financial restatements and their suppliers’ audit opinions. Heckman selection model, placebo tests and other robustness checks are used as well.FindingsThe findings reveal that customers’ financial restatements have a significant effect on the likelihood of suppliers receiving modified audit opinions. This relationship is pronounced when suppliers face a higher level of financial constraints, exhibit poorer accounting conservatism or receive more negative media coverage. Additionally, this effect occurs through increased business risk and information risk, which heightens auditors’ perceived audit risk. Moreover, the study highlights the influence of switching costs, auditor expertise and restatement severity on this relationship.Practical implicationsRisks originating from customers can spread along the supply chain, emphasizing the necessity for auditors to give heightened attention to both the audited firms and their customer information. Moreover, regulators should carefully consider the important impact of customer information disclosures to maximize the protection of the interests of external information users.Originality/valueThis study not only confirms the crucial role of customer information disclosures in annual reports for stakeholders and auditors but also contributes to the existing literature on customer–supplier relationships.

The Effects of Terrorist Attacks on Supplier–Customer Relationships

We examine the causal effects of nearby terrorist attacks on supplier–customer relationships. We find that for supplier firms located near terrorist attacks, the probability of relationship termination with their major customers increases by 2.9 percentage points within two years following the attacks. The major customers’ intensified perceptions of supply chain risk largely drive the relationship termination. Further analyses show that major customers tend to switch to suppliers with lower terrorism risks after they end their relationships with the suppliers near attacks. This study provides new insights into the consequences of terrorism by extending the focus to the response of a key stakeholder group (i.e., trade partners) instead of the attack-afflicted firms per se.

Birds of a feather: Building trust in customer-supplier relationships

This study examines the effect of board similarity on customer-supplier relationships using a sample of Chinese listed companies from 2007 to 2020. We introduce a novel measurement comprising six key dimensions of director characteristics to gauge board similarity. Our findings indicate that increased board similarity enhances cooperation between customers and suppliers. However, this effect is weakened by long distances, making trust-building challenging, and in highly marketized environments, where trust has less influence on business interactions. This study contributes to the existing literature on supply chain relationships, highlighting the role of effective governance mechanisms like board similarity in fostering inter-firm cooperation. Additionally, it offers practical insights for managers aiming to cultivate strategic partnerships and investors seeking a deeper understanding of supply chain dynamics.

Utilizing Artificial Intelligence (AI) in enhancing customer-supplier relationship: An exploratory study in the banking industry

This study provides a comprehensive overview of the field of enhancing the customer-supplier relationship through big data technology and artificial intelligence (AI), reveals existing gaps and offers promising solutions for future research. SMART PLS-4 software was used to analyze the data collected, the results led to the existence of significant relationships between artificial intelligence and enhancing the relationship between the supplier and the customer (customer interaction, customer communication, customer participation, customer learning, customer experience, customer feedback). The study contributes to developing a conceptual model through the application of artificial intelligence in managing customer relationships with suppliers in the banking industry. The study contributes to developing a conceptual model through the application of artificial intelligence in managing customer relationships with suppliers in the banking industry setting. Which supports increasing knowledge in this field and helps managers develop appropriate strategies. This research is the first of its kind to organize and discuss the literature related to using artificial intelligence within the customer-supplier relationship management setting, which provides great importance to the process of using and developing artificial intelligence technology and understanding recent trends in how to develop customer–supplier relationships within the technology era.

Structural capital and relational capital: examining the direct and moderating role of cognitive capital in customer-supplier relationships

Structural capital and relational capital: examining the direct and moderating role of cognitive capital in customer-supplier relationships

Green links: corporate networks and environmental performance

Abstract We investigate the propagation of environmental performance among competitors and in customer–supplier relationships. We find a significant causal effect among competitors, while the propagation from customers to suppliers and vice versa appears insignificant or does not survive identification tests. The effect is stronger among firms in highly concentrated competitor networks and toward firms with less market and bargaining power than their competitors. We also find significantly stronger propagation of environmental performance among competitors engaged in joint research and development activity. These results show that the propagation stems from both competitive pressure and technological spillover. Importantly, we find that propagation is strong when the competitor improves its environmental performance and when the firm’s own environmental performance is poor initially, alleviating concerns that improvements in performance are concentrated among firms, which are already green. Overall, network effects among competing firms are a significant force shaping environmental performance, and a force mostly for good.