Supplier Firms Research Articles

Industrial robots and firm innovation: big data evidence from China

PurposeRobots are widely used in industrial manufacturing and service industries around the world. However, most of the previous studies on industrial robots use data at the national or industry level in the context of developed countries. This study examines the impact of imported industrial robots on firm innovation at the firm level in China.Design/methodology/approachDrawing on a large dataset of more than three million records in China, including non-publicly traded small and medium firms, the authors adopt a difference-in-differences method to investigate the impact and channels of industrial robots on firm innovation.FindingsThe authors find that the application of industrial robots increases firm innovation. Two possible channels are identified through which robots promote innovation: alleviation of financial constraints and the improvement of human capital. Further analysis shows that the effect of robots on innovation is more pronounced for firms that are highly dependent on external financing, belong to high-tech industries, import high-end robots, have insufficient supply of skilled labor and private firms (non-SOEs). The authors also find that industrial robots increase the firms' innovation quality and the marginal contribution of innovation to firms' total factor productivity.Originality/valueThis study provides big data evidence of the unintended positive consequences of industrial robots on firm innovation. The results are helpful to clarify the controversy of industrial robots. It also has important implications for government industrial policy making, firm innovation and human resource management.

Economic and Social Upgrading of Supplier Firms in Global Value Chains: An Institutional Approach

Bu makale, küresel değer zinciri (KDZ) katılımı ile ekonomik/sosyal yükselme arasındaki ilişkileri açıklayan kavramsal bir model geliştirmektedir. Ayrıca model, kurumlar kavramının KDZ katılımı ve iyileştirme arasında önerilen ilişkiler üzerindeki düzenleyici etkisini de ortaya koymaktadır. Model, KDZ literatürünü eleştirel bir şekilde irdelemekte ve tedarikçi firmaların KDZ'lere katılarak ekonomik ve sosyal gelişmenin nasıl sağlanabileceğini açıklamaktadır. Her ne kadar literatürdeki çalışmalar yükseltme kavramını anlamayı amaçlamış olsa da bunlar çoğunlukla dar bir yaklaşım uygulamış ve çoğunlukla ekonomik yükselmeye odaklanmıştır. Bununla birlikte, KDZ'deki son olumsuz olaylar (örn. Rana Plaza'nın çöküşü), iyileştirmede bütünsel bir yaklaşım olması gerektiğini ve sosyal iyileştirmenin de katılımcı firmaların iyileştirme hedeflerinin ön saflarında yer alması gerektiğini göstermiştir. Önceki çalışmalar ekonomik gelişmenin nasıl ve hangi koşullarda sağlanabileceğini gösterse de sosyal gelişme ve ayrıca ekonomik ve sosyal gelişme arasındaki etkileşim konusunda sınırlı bir anlayış vardır. Ayrıca, önceki çalışmalar çoğunlukla KDZ'lerin iç dinamiklerine (yani yönetişime) odaklanmış ve yükseltmeyi etkileyen dış faktörlerin önemini gözden kaçırmıştır. Yukarıda bahsedilen araştırma boşluklarından yola çıkan bu çalışma, KDZ'lerde ekonomik ve sosyal gelişmenin nasıl ve hangi bağlamlarda sağlanabileceğini açıklayan kavramsal bir model geliştirerek literatüre anlamlı bir katkı sağlamaktadır. KDZ katılımı, ekonomik ve sosyal gelişme ve kurumlar arasındaki etkileşimler altı önermeyle eleştirel bir şekilde açıklanmış ve kavramsallaştırılmıştır. Küresel değer zincirleri, küresel ticaretin önemli bir bileşeni haline gelirken, bu çalışma, ekonomik ve sosyal gelişmenin nasıl ve hangi koşullar altında sağlanabileceğini anlamayı amaçlayan gelecekteki çalışmalar için fırsatlar yaratmaktadır.

Customer–supplier relationships and non-linear financial policy response

We investigate whether changes in the capital structure of major customers play an important role in determining the firm’s financial policy. Following (Leary and Roberts, 2014) and using average customer idiosyncratic equity return shocks, we find that a firm’s leverage ratio is negatively and nonlinearly affected by the leverage ratio of its major customers. This “customer effect” occurs only when the idiosyncratic equity shock to the customer firms is negative. Consistent with the prediction of the modified pecking order theory that firms are more concerned about excessively high leverage ratios than excessively low leverage ratios, supplier firms tend to significantly reduce their long-term debt in response to increases in the leverage ratios of their major customers but are insensitive to the inverse change. Finally, consistent with the stakeholder theory and the dynamic trade-off theory, we find that this capital structure correlation is more pronounced for firms producing specialized or unique products, firms with lower profitability, firms with weaker operational capabilities, firms that take more risks, firms whose customers operate in more competitive industries, and firms whose customers are more financially vulnerable. Our results contribute to identifying the dynamics and determinants of corporate capital structures.

Reinforcing resilience on the supply side: the role of supplier capabilities

PurposeThis research study aims to investigate supplier integration's (SI) impact on supply-side resilience (SSR) while considering the intervening role of supplier sustainability and supplier flexibility (SF).Design/methodology/approachGrounded in the dynamic capabilities view (DCV), the study posits that integration of the focal firm with firm's suppliers leads to sustainability on the supplier's side, which makes the firms more flexible to work with during disruptive circumstances, resulting in resilience on the supply side. The hypotheses are tested on the data of 181 manufacturing firm supply chain managers from a developing country.FindingsThe research findings confirmed the hypothesized model suggesting that SI positively impacts SSR. The results also confirm the existence of sequential mediation of supplier sustainability and SF between the SI–SSR relationship.Practical implicationsThe results of this study show that SI is the primary capability for organizations seeking SSR. Furthermore, the supply-side capabilities, to be effective, are developed in a specific order.Originality/valueThis research advances the body of knowledge by identifying the underlying mechanisms through which SI augments SSR.

Geopolitical risks of strategic decoupling and recoupling in the mobile phone production shift from China to Vietnam: Evidence from the Sino-US trade war and COVID-19 pandemic

Drawing upon the Global Production Networks (GPN) 2.0 theory, this paper offers an updated and novel investigation on the geopolitical dynamics and risks of strategic coupling in the mobile phone production shift from China to Vietnam, amidst the Sino-US trade war and COVID-19 pandemic. The study was conducted on the basis of the onsite investigation during 2016 and 2019, and follow-up online interviews during 2020 and early 2023 with concerned mobile phone transnational corporations (TNCs) engaging in production relocation from China’s coastal regions, e.g., the Pearl River Delta to Vietnam, particularly the Red River Delta (RRD). Despite the fashionable discourse of decoupling from China induced by the pandemic-caused supply chain disruption, this paper argues that both lead firms and supplier TNCs have increasingly engaged in the “China+1” strategy prevalent prior to the trade war and pandemic. What’s more, the mobile phone production network has been reconfigured by the heightened geopolitical tension and the pandemic-induced risks. Verified by the case studies of Samsung, Apple, Foxconn, and China-based lower-tier supplier firms, we explored why and how different tiers of TNCs in the mobile phone production networks have responded strategically to the geopolitical dynamics and risk environment. The development of the RRD into an emerging mobile phone cluster has been driven by a multi-level recoupling in the dynamic production networks. The findings advance the GPN literature by highlighting the geopolitical risks of strategic coupling in the production network reconfiguration in the changing global economy, a lacuna in the existing literature, which warrant further exploration in other regions and industries.

You've lost that learning feeling: Drivers and drawbacks of channel partner disengagement with sales training

Despite significant investment by supplier firms in channel partner programs (CPPs), disengagement from training is common. Disengagement can diminish the return on investment (ROI) by inhibiting gains in sales ability and subsequently reducing reseller-channel partner relationship satisfaction. In an international field study with a Fortune 100 company, the authors examine the impact of sales role orientations on disengagement and subsequent outcomes, as well as the conditioning effect of market turbulence. The results indicate that both customer and selling orientations have significant, countervailing impacts on disengagement, and that reseller role ambidexterity reduces disengagement. Additionally, although market turbulence did not modify the impact of selling orientation on disengagement, it does moderate the customer orientation-disengagement relationship. Finally, disengagement does negatively influence both changes in perceived sales ability and subsequent satisfaction with the channel partner relationship. Findings from this unique, longitudinal field study have important implications for both scholar and practitioners, including participant selection and supplier CPP strategies.

Within firm supply chains: Evidence from India

There are competing theories on whether vertical ownership is motivated by the transfer of physical inputs or the transfer of intangibles. Using administrative data on the universe of goods shipments in Karnataka, India, we show that the supply of goods along the production chain is an important rationale for vertical integration. First, we develop and estimate a gravity model of input sourcing, and find that: (1) establishments have a strong preference for sourcing their physical inputs from suppliers within the same firm relative to other frictions such as distance and state borders, and (2) the share of within-firm trade would be near 2% absent this preference for internal suppliers. Next, we compare this to the data and find that 38% of products are sourced by establishments exclusively from within the firm when a vertically integrated supplier exists; an order of magnitude higher than our 2% benchmark. Finally, we validate that within-firm sourcing is associated with determinants of physical supply chain transaction costs such as product specificity and R&D investment.

Cost decisions of supplier firms: A study based on the customer-supplier link

We examine the association between the cost decisions of suppliers and their key customers. Using a U.S.-based sample of customer-supplier pairs, we document that an increase in the key customer firm’s cost stickiness in the prior period results in a significant increase in their suppliers’ cost stickiness in the current period. This finding suggests that suppliers observe and incorporate the cost decisions of their key customers into their own cost decisions. Further, we find that this relationship is concentrated in the sub-sample where the likelihood of information frictions in the supply chain is high, the customer firms have a positive future demand outlook, and the customer firms’ managers have fewer opportunities to engage in empire-building activities. This paper contributes to the growing literature on cost behavior and supply chains by documenting the role of cost decisions of customers in mitigating the adverse effect of information frictions in supply chains. This paper also provides industry-related implications by suggesting that an increase in the cost stickiness of customer firms could act as a signaling mechanism for the supplier firms allowing them to prepare for a potential change in future demand.

Customer concentration and stock liquidity

This research empirically examines how customer concentration affects stock market liquidity of supplier firms. We find that firms with a concentrated customer base are strongly and positively associated with stock market liquidity, which is robust to a battery of model specifications and endogeneity issues. The positive relationship between customer concentration and liquidity is concentrated among firms with relatively small size, high financial constraints, and high information asymmetry. Further analyses provide supportive evidence on the monitoring role of principal customers in improving firms’ stock liquidity. Overall, these findings suggest that relationships with principal customers serve as valuable signals for the underlying quality of firms, and thus firms in such relationships are able to achieve favorable economic outcomes.

Competitive actions and supply chain relationships: How suppliers' value‐diminishing actions affect buyers' procurement decisions

AbstractWhile greater competitive activity is generally associated with competitive advantage, certain competitive actions by a supplier may have spillover effects that adversely impact buying firms, leading them to reduce future purchases from the supplier. We study the effects of competitive actions in the context of vertical buyer–supplier relationships. Specifically, leveraging insights from screening theory, we examine how a supplier firm's value‐diminishing competitive actions—moves that may negatively impact buyer firms—lead to subsequent reductions in the buyer's procurement allocations and how contextual factors moderate such adverse effects. We test the associated hypotheses using a panel dataset comprising 12,690 dyadic buyer–supplier observations. A series of econometric analyses provide consistent evidence that a supplier's value‐diminishing actions are associated with decreases in the buyer's purchases from the supplier, thus highlighting the “dark side” of competitive actions. Furthermore, we find that the supplier's downstream vertical relatedness and the degree to which rival suppliers pursue value‐diminishing actions moderate this effect. Our findings, thus, add to our understanding of factors that shape the success and continuity of supply chain relationships and help supplier firms evaluate the economic viability of their competitive actions.

Data breaches (hacking) and trade credit

This study examines the relationship between data breaches (hacking) and trade credit for U.S. firms. Employing a staggered difference-in-differences approach, we observe that breached firms face shorter payable periods from suppliers than the control group. Data breaches increase the operational risk of breached firms. Suppliers associate high information risk with breached firms. Our findings remain robust to alternative specifications and are more pronounced for firms with no in-house IT expertise and an increased number of stolen records. Overall, our findings suggest that supplier firms become more prudent with the extension of trade credit after data breaches.

Customer value-in-use monitoring in business markets: An investigation into its determinants and consequences

Monitoring customers' value-in-use (VIU) is the necessary next step in relationship management, as the emerging literature on customer success and value management shows. However, despite considerable academic and managerial interest, how suppliers' internal structures and processes can adequately support VIU monitoring—and what relationship effects can be expected from this process's execution—remain unclear. Drawing on two unique data sets, we build on supplier and customer evaluations of VIU monitoring to empirically examine the constructs' determinants and consequences. In Study 1, we survey 140 supplier firms to demonstrate that two factors positively affect VIU monitoring: top managers' support for customer success management and a supplier's ability to engage in task discourse with customers. In Study 2, we test VIU monitoring's effect on customer-perceived relationship value using data from 155 customer firms. Our results demonstrate that VIU monitoring positively affects relationship value as it is perceived by the customer firm. However, VIU monitoring is not equally important for each supplier–customer relationship. Moderator analysis reveals that a customer's absorptive learning capacity can partially compensate for a supplier's weak VIU monitoring activities.

The impact of customer firm data breaches on the audit fees of their suppliers

This study investigates whether audit risks that accompany data breaches of major customer firms can spillover into the supply chain and affect audit fees of their suppliers. Based on the economic bond that exists between supplier firms and their major customers, we predict that data breach incidents of customer firms will lead to higher audit fees for their respective suppliers. Consistent with customer breaches increasing the audit risk to the supplier, we observe a positive association between breach disclosures made by major customers and audit fees of the supplier firm. This association exists for both internal and external data breaches. We further find that audit fees are increasing with the number of major customers disclosing a breach in a given year. Our results are robust to both a matched sample design and a difference-in-difference approach. Interestingly, we find that while supplier auditors appear to price the risks associated with customer breaches, the breaches do not appear to affect audit quality. The findings of this study are timely and relevant to academics, practitioners, and regulators as supply chains continue to become larger and more complex.

Major-customer geographic proximity and supplier trade credit: empirical evidence from China

ABSTRACT Customer geographical proximity is a factor influencing supplier firms’ trade-offs when granting customers trade credits. However, the extant literature offers scant empirical evidence on the effect of customer location on supplier firm’s trade credit. This paper investigates the impact of major customers’ geographical proximity on a supplier firm’s trade credit. Using a sample of 5,587 observations of publicly listed Chinese firms between 2007 and 2017, we document a positive relationship between major customers’ geographical distance and the supplier firm’s trade credit. Moreover, the main results remain robust when changing samples and considering endogeneity problems. This paper also tests two potential channels and identifies the exploring market channel that exists in our sample. Furthermore, the main relation is more pronounced in supplier firms with low financial risk, operating in areas of high marketization, high product development, strong legal environments, and low economic policy uncertainty. This paper extends the existing literature on the economic consequences of customer characteristics on supplier firms to include customer geographic proximity. In addition, this paper sheds light on supply chain risk management.

주요 고객사의 장기 인센티브와 공급사의 성과

This paper examines the relationship between major customers’ long-term CEO incentives and supplier firms’ performance. Long-term equity incentives encourage CEOs to pursue relatively long-time horizons, potentially influencing certain relationships with slanted bargaining power. We predict and find that major customers’ long-term CEO incentives, as measured by CEO incentive for unvested equity, are positively associated with supplier firms’ profitability, partially through a reduced emphasis on myopic price-cuts. However, we also find that customers’ equity incentives appear to decrease suppliers’ operational efficiencies and cost elasticity, implying that suppliers bear burdens of implementing stable resource supplies in exchange for the price protection from the customers. Collectively, our results suggest that customers’ long-term incentives may have multifaceted consequences on suppliers’ performance and operations.

Customer concentration and firm risk: The role of outside directors from a major customer

This paper examines the role of customer-affiliated outside directors on suppliers in reducing risk arising from having a major customer. Using a sample of US supplier firms, we find that a positive relationship between having a major customer and supplier risk is weakened with the presence of the major customer's representatives at suppliers' board. We further show that suppliers with customer-affiliated outside directors are more likely to have less conservative financial policies. Our results suggest that customers' board membership at suppliers helps mitigate the business risk due to the tightened supplier–customer relationship and reduced information asymmetry.

Econometrics and Machine Learning Approach on Correlation in Stock Return between US Firms and Chinese Suppliers

This study investigates machine learning on influential factors on the correlation of the stock return movements between US firms and their Chinese suppliers, given that the overall correlation has already been proven in the previous study. The present investigation was conducted by performing econometrical analysis and applying a variety of regression models to US firms' stock returns (independent variable) and their Chinese suppliers' stock returns (dependent variable) with various factors involved. From the results, it was evident that industry differences are a factor that caused variations in the degree of stock return correlations. Furthermore, firm size and stock trading volume yielded positive impacts on the significance of the correlation. Subsequently, predicated on said findings, a prediction model was generated using the Random Forest machine learning approach. Using US customer firms' monthly stock return data, as well as the three aforementioned factors, the monthly stock return value of their Chinese supplier firms can be predicted.

Exporting and sourcing strategies

AbstractThis study uses firm‐level panel data for South Korea for the period 2006–2015, to investigate changes in firms' sourcing behaviors after these firms start exporting. The data studied includes detailed information on firms' export status, whether their purchases of intermediate inputs were domestic or from foreign markets, and whether the supplier firms were affiliated or non‐affiliated. To estimate the effects of exporting on firms' sourcing strategies, we employ a difference‐in‐differences estimator with propensity score matching. The main finding is that participation in export markets leads to the increased use of intermediate inputs purchased from foreign suppliers; it also increases these firms' sourcing from affiliated parties relative to sourcing from non‐affiliated suppliers. These changes in firms' sourcing compositions after their entry into export markets are mainly driven by purchasing rather than subcontracting. These findings point out that firms that newly participate in exporting tend to improve their product competitiveness by increasing the proportion of their intermediate inputs from foreign affiliates. It is also possible that these firms expanded their foreign networks after they begin export activities, and this plays a role in how and where they source their intermediate inputs.

Privatization Policy and Foreign Competition in Vertically Related Markets

This paper examines the privatization policy of an upstream state-owned enterprise (SOE) that competes with a foreign private rival and a downstream SOE, wherein the upstream firm supplies an intermediate input to the downstream firms. Specifically, the study investigates two scenarios where the intermediate input is utilized in either the traded or non-traded sector. In the traded sector, foreign competition exists, while the non-traded sector consists of all domestic firms. The findings of the study indicate that, in the model where the downstream is a traded sector, partial privatization of the upstream SOE is not optimal when the downstream SOE is fully nationalized or privatized. On the other hand, in the model where the downstream is a non-traded sector, partial privatization of the upstream SOE is optimal when the downstream SOE is fully nationalized or fully privatized. Therefore, the study suggests that if the upstream industry supplies its product mainly to the non-traded sector, such as domestic transportation or construction, partial privatization of the upstream SOE is recommended. However, if the intermediate input primarily flows to traded sectors, such as steel or international shipment, partial privatization of the upstream SOE is not advisable.

Effect of supplier cost stickiness on environmental, social, and governance: Moderating role of customer bargaining power

AbstractFirms with high selling, general, and administrative (SG&A) cost stickiness may maintain environmental, social, and governance (ESG) performance, and customer firms that account for a large proportion of supplier firms' sales (main customers) have considerable bargaining power regarding sales terms. In this study, we examine the effect of SG&A cost stickiness of supplier firms on their ESG performance. We further examine the moderating effect of a customer's bargaining power on the relationship between cost stickiness and ESG performance. The findings reveal that supplier firms with high cost stickiness have higher ESG performance, whereas supplier firms with main customers have lower ESG investments. The influence of main customer firms mitigates the positive relationship between the SG&A cost stickiness and ESG investment of supplier firms. In additional analysis, we obtain consistent conclusions for large firms and firms with high production efficiency.