Supplier Firms Research Articles

Trade credit provision and innovation: A strategic trade-off

Our study focuses on Chinese-listed firms, revealing a distinct substitution effect between trade credit provision and innovation, diverging from the complementary relationship found in prior U.S. research. We identify a negative correlation between trade credit provision and R&D intensity, particularly evident among supplier firms with reduced bargaining power. Surprisingly, no discernible link emerges between supplier financial distress risk and trade credit provision or R&D outcomes. Additionally, we find that trade credit provision hampers innovation, evidenced by a decline in patent applications and granted patents. These findings suggest that, especially in contexts marked by intense product market competition and incomplete financial markets, supplier firms strategically opt for trade credit provision as an alternative to innovation—a form of relationship-specific investment. Importantly, our results imply that the reduction in firm innovation activities is less likely a post hoc consequence of financial constraints resulting from trade credit provision.

The impact of public procurement on the adoption of circular economy practices

In recent years, the circular economy (CE) has drawn considerable attention from both academia and industry alike, with public procurement emerging as a widely adopted public policy tool for achieving economic goals and sustainable social development. However, the impact of public procurement on firms’ adoption of the CE and the mechanism affecting this relation are not fully understood. By analyzing a sample of Chinese listed firms from 2010 to 2020 based on logit regression models, we find that supplier firms engaging in public procurement are more likely to adopt CE practices. In addition, we find that an increase in firms’ market power weakens the positive effect of public procurement on CE adoption, whereas government attention and institutional ownership strengthen this effect. Furthermore, we distinguish between local governments and the Chinese central government as buyers and find that local governments play a more significant role in promoting CE adoption than the central government. This study provides the first empirical evidence of the relation between public procurement and CE adoption and identifies the mechanism by which public procurement affects CE adoption.

Asset-Based Money Systems in a Global Context: Implications for Social Inclusion and Economic Development

Fiat money based financial system has disturbed the balance between household demand and firm supply. Further, government monetary intervention to curb inflationary demand is hurting production via the cost of capital and disturbing the functionality of the financial system in terms of capital market misallocation. These aspects are trickling down to cause social disturbance in the economy. Corresponding to it, the gold standard or at least assets-based money promotes social inclusion, empowers marginalized communities, and addresses socio-economic challenges by using tangible assets as a monetary system. The study explores assets-based money’s theoretical foundations, distinguishing it from traditional debt-based models and its potential benefits on social inclusion. It analyzes potential benefits, challenges, and limitations in implementing assets-based money systems. Several empirical studies explored debit cases of Islamic and conventional finance sectors, but this study examines the high power money and social inclusion in the economy. For this determination, the quantitative research approach consisted of selected 143 countries panel data of conventional and Islamic financial statements from 1960-2022. The model contains regression estimates, descriptive analysis, and correlation coefficient analysis. The assets-based money boosts living standards and positively impacts poverty reduction. This money reduces the inflationary effects of monetary expansion, hurting the purchasing power of low-income groups. Further, it is expected to have a growth-promoting effect via risk sharing and resource distribution. Assets-based money can support economic growth, financial stability, and inclusive development through a well-designed implementation strategy, but success depends on thorough research and analysis.

Customer contagion effects of voluntary environmental regulation: A supplier green innovation perspective

Prior studies primarily focused on internal green innovation and environmental performance concerning voluntary environmental regulations. Little attention has been given to the impact of partner-imposed regulations, such as those by customers, on green innovation in supplier firms. This research explores the influence of customer-driven voluntary environmental regulation on supplier green innovation and its mechanisms. The findings indicate that customer-driven voluntary environmental regulation leads to a positive contagion effect, significantly fostering supplier green innovation. Robustness is maintained through tests, including trend analysis, placebo tests, propensity score matching (PSM), and controls for spillover mechanisms and external influences. Demand feedback and knowledge spillover are identified as mediating mechanisms. Additionally, equity linkage and state ownership in suppliers facilitate customer-driven voluntary environmental regulation, further promoting green innovation. This study advances understanding in the context of supply chain green innovation.

Information infrastructure construction and firm export performance in China

This paper examines the causal relationship between information infrastructure construction and firms’ export performance. Adopting the "Broadband China" strategy as a quasi-natural experiment, we conduct a difference-in-differences estimation to demonstrate that the implementation of information infrastructure construction is a significant contributor to firms' export performance, an effect that withstands extensive robustness tests. We identify three main channels through which information infrastructure construction promotes firms' export performance: facilitating digital transformation, expanding firm production scale, and enhancing firm supply chain management capabilities. Particularly, the export response to information infrastructure construction is stronger for manufacturing firms, high-tech firms, and those firms with abundant human capital. Given significant ongoing information infrastructure investment in many emerging countries, this result provides important new information on the impacts of information infrastructure construction on exports.

Customer Concentration and Labor Investment Efficiency: Evidence from China

ABSTRACT: The labor force constitutes a paramount factor of production in the realm of business operations. In the past, China's abundant labor force significantly boosted productivity for firms. However, as the demographic dividend gradually wanes, concerns have arisen regarding a scarcity of labor force, exacerbating worries about rising labor costs. Therefore, focusing on enhancing firms' labor investment efficiency becomes pivotal. Using a sample of A-stock listed firms in China from 2013 to 2020, we examine the impact of customer concentration on the labor investment efficiency of supplier firms. Prior literature provides mixed results regarding the effect of concentrated customers. They can act as a governance mechanism for reducing agency problems, thus, increasing investment efficiency. Conversely, agency problems are aggravated in suppliers with concentrated customers, consequently, reducing investment efficiency. Our results suggest that customer concentration reduces labor investment efficiency, and this effect is more pronounced when customers possess high bargaining power. Additionally, the mechanism analysis reveal that customer concentration leads to less accurate information disclosure, higher operating risk, and an incentive to "empire building", reducing labor investment efficiency. The cross-sectional analysis reveals that customer concentration results in both over- and under-investment in labor, thereby reducing investment efficiency. In addition, we employ augmented models to rule out the possibility of a U-shaped relationship between customer concentration and labor investment efficiency. Furthermore, we adopt the instrumental variables approach as well as a two-stage regression model to address potential endogeneity concerns and mitigate the omitted variable concern. Our results hold after the robustness tests and endogeneity tests. The findings of this paper imply that firms should strategically diversify their customer bases, thereby reducing their reliance on a few large customers. Simultaneously, governments should actively encourage firms to broaden their customer base. It can help enhance labor investment efficiency by spreading the risks associated with customer concentration. Moreover, it is crucial to acknowledge that substantial customer bargaining power can negatively impact supplier firms. Thus, policymakers should promote antitrust regulations and fair trade practices to mitigate the high bargaining power of large customers.

Blockchain applications and supply chain performance: evidence from Chinese firms

ABSTRACT As blockchain technology becomes increasingly prevalent in firms, it is worth exploring its impact on firms’ supply chain performance (SCP). Based on 13,230 research samples from 1,761 A-share listed firms collected from CNRDS between 2012 and 2019, this paper conducts an empirical study on how blockchain technology would affect the performance of supply chains. We divide our sample into two groups based on whether firms apply blockchain and conduct an empirical study using the difference-in-difference (DID) model. This study contributes to the literature by utilising quantitative methods and integrating blockchain with SCP. The results indicate that the application of blockchain technology can increase the performance of the supply chain represented by the cash-to-cash cycle. A series of robustness tests and the placebo test also support this conclusion. The improving effect of blockchain on the performance of firm supply chains is only significant in non-state-owned enterprises (NSOEs), smaller firms, and non-manufacturing firms. Our study contributes to the continual development of theories about SCP, guiding firms to implement measures that unlock the full potential of blockchain to improve their SCP.

Can Common Institutional Investors in Supply Chains Decode the Bullwhip Effect? Evidence From Order Backlog Mispricing

This paper examines the role of supply chain common institutional investors (i.e., who own stocks of both upstream suppliers and their downstream customers in a supply chain) in the valuation of upstream supplier firms’ order backlog information. Based on the theory and evidence that backlog orders’ predictive power is diminished further in a supply chain due to the bullwhip effect, we hypothesize and find that the overpricing of order backlog is mainly driven by upstream rather than downstream firms. More importantly, we use both hedge portfolio methods and Fama-MacBeth regressions to show that common institutional investors in a supply chain can utilize their knowledge to better incorporate the bullwhip effect and mitigate the magnitude of order backlog mispricing. Further, we find that the overpricing of second-tier suppliers’ backlog orders and thus, the role of supply chain common institutional investors is more pronounced during expansion periods than during recession periods. Overall, we highlight the role of institutional supply chain knowledge in improving pricing efficiencies of complex supply chain dynamics.

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.

Endogenous timing in a mixed duopoly when a public firm supplies its private competitor

ABSTRACT We examine endogenous timing in a quantity setting mixed duopoly where a public firm, in addition to selling a good in the retail market, manufactures an input required to produce this good and supplies it to its private retail competitor. In this setting, the traditional separation between suppliers and retailers fails to hold, a situation commonly observed in many markets. We focus on the case of regulated input prices, which often appear under such circumstances, and consider both an exogenous input price and one optimally chosen by a regulator. The results may be substantially different from those obtained under conventional assumptions about the relationship between suppliers and retailers. In particular, for a wide range of parameter values early simultaneous moves are observed in equilibrium.

Supplier selection among manufacturing companies based on their MSME partners’ supply chain finance adoption capability using BWM and VIKOR

PurposeThe purpose of this paper is to identify and prioritise supply chain finance (SCF) adoption enablers and develop a novel comprehensive framework to select supplier firms based on their SCF adoption capability.Design/methodology/approachThe study deploys a three-phase method to identify and prioritise SCF adoption enablers, followed by developing a model to select suppliers according to their SCF adoption capability. An extensive literature review, followed by a Delphi approach-based expert interview, has been used to finalise the enablers. Using the Best Worst Method and the VIsekriterijumsko KOmpromisno Rangiranje technique, a supplier selection model has been developed in the context of a case company.FindingsThe financial health and technological advancement variables received the top priority, followed by collaborative efficiency, whereas the human resources and organisational variables received the slightest significance. A supplier selection framework has also been developed by using the adoption capability of these factors by the supplier partners. In this study’s model, Supplier 4 exhibited better SCF adoption capability and received the top priority.Research limitations/implicationsManufacturing supply chains in a developing country are the scope of the current study. Extensive future studies are required to derive a global consensus.Practical implicationsThe proposed framework of this study can be used to select supplier firms based on their SCF adoption capability. Policymakers can emphasise the most critical enablers of SCF adoption to assist small supplier firms to be a part of the advanced global supply chains.Originality/valueThe current study established a novel comprehensive framework for supplier selection based on the Supply Chain Finance adoption capability of MSME supplier firms.

The US government customer concentration and the firm innovation

PurposeThis study examines the impact of the US government customer concentration and product innovation in supplier firms. The US government customer concentration is defined as the proportion of sales made by a supplier firm to the US government as a major customer. To measure product innovation, the author uses two key metrics: the number of patents and the novelty of the patents. The results indicate that a supplier firm’s relationship with the US government, as measured by the tenure of the relationship, has a significant impact on product innovation. Furthermore, the author shows that changes in the composition of the US government, Senate can also affect the level of innovation in supplier firms.Design/methodology/approachThis study employs the Compustat’s Segment Customer database and the National Bureau of Economic Research (NBER) Patent Citation database to gather information regarding patents granted by the United States Patent and Trademark Office (USPTO). The author also incorporates data from US Congressional committees from the 96th to 115th Congresses to assess the effect of changes in seniority of US senators on influential committees on the firm’s innovation. For a robustness test, the author utilizes a propensity score matched analysis.FindingsThe author demonstrates that a firm’s dependence on the US government as a customer channel for an extended period negatively impacts the firm’s innovation efficiency, as measured by the number of patents, citations and novelty of the patents. In addition, the author provides evidence that changes in the seniority of US senators on influential committees have a significant impact on firms located in the same state as the new senior senators. These firms decrease innovative efforts due to the political connections, resulting in lower levels of innovation. These findings are robust after controlling the endogeneity issues. In conclusion, this study contributes to the existing literature by offering insight into the relationship between customer concentration and firm innovation. The findings highlight the importance of considering the relationship between firms and their customer base in determining innovation outcomes.Originality/valueThis study demonstrates that a heavy reliance on the US government as a customer channel has a detrimental impact on a firm’s innovation efficiency. Furthermore, the author analyzes the exogenous shock of changes in the seniority of US senators on the relationship between customer dependence and innovation. By utilizing a propensity matched sample, the author addresses endogeneity concerns and provides robust evidence for empirical findings. In conclusion, this study sheds light on the complex relationship between customer dependence and firm innovation, particularly in the context of the US government as a sales channel.

ICT Team Dual-Innovations in the Microlevel of Circular Supply Chain Management: Explicit-Tacit Knowledge, Exchange Ideology, and Leadership Support

An emerging information communication technology (ICT) triggers circular supply chain management (CSCM), there is still much to be addressed effectively, especially at the microlevel of CSCM. The purpose of this article is to build an integrated model for ICT team exploratory and exploitative innovation in the lens of CSCM and circular economy context. Our analysis was supported by 124 industries-ICT teams (368 participants) in Indonesia. We used structural equational model SmartPLS to validate the development model and Sobel approach to confirm the mediation hypothesis. Supply chain manager, ICT department, and industries executive level are suggested to encourage knowledge sharing practices both explicit and tacit knowledge. Firm's supply chain may follow path-goal leaders to promote effectively circular supply chain management. It is also highlighted that exchange ideology as a moderator help leader to understand their team orientation and contribution to knowledge sharing activities and leader's characteristics. We contribute to a microlevel of CSCM context and new understanding of how explicit-tacit knowledge sharing (mediator), exchange ideology (moderator), and leaders support in ICT team exploratory-exploitative innovation, and as new foundation for future studies on cross-CSCM ICT team including encourage more detailed analysis of exchange ideology orientation.

Customer Firms’ Resistance and Innovation of Entrepreneurial Supplier Firms in the Blockchain Industry: The Mediating Role of Knowledge Assimilation

Customer Firms’ Resistance and Innovation of Entrepreneurial Supplier Firms in the Blockchain Industry: The Mediating Role of Knowledge Assimilation

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.

Identification and assessment of supply chain risks: The case of food hubs

AbstractThe supply chain risk management literature highlights the importance of ex‐ante identification and assessment of risks to ensure continuity of firms, in particular, and the high performance of supply chains in which they operate, in general. Supply chain disruptions are harmful and costly for firms. The risk of such disruptions can be particularly consequential for firms in emerging industries that lack resources and for which dominant organizational and supply chain designs do not yet exist. Within local and regional food supply chains, food hubs are nascent enterprises coordinating these supply chains. Building off the existing supply chain risk management literature, this study identifies and assesses the perceived supply chain risks faced by U.S. food hubs. The study employs an exploratory sequential mixed methods research design and the Failure Mode and Effect Analysis methodology for this purpose. The results show risks related to imbalances in food supply and demand, logistical delays, human resources, and infrastructure capacity limitations were perceived to be the highest priority supply chain risks for the U.S. food hubs before the COVID‐19 pandemic. The study further provides insights on association between food hub characteristics and risk, as well as association between risk preferences and risk perceptions of food hub managers [EconLit Citations: L29 Other (Firm Supply Chain Risk Management)].

Overlapping institutional ownership along the supply chain and earnings management of supplier firms

We explore the impact of overlapping institutional ownership (OIO) within supply chains on the earnings management practices of supplier firms. Utilizing a dataset of U.S. publicly traded supplier firms from 1988 to 2016, we discover that suppliers with institutional ownership overlapping with their major customers exhibit reduced levels of discretionary accruals. This finding implies that such overlap discourages suppliers from engaging in upward earnings management through the manipulation of discretionary accruals. We also find that OIO curtails accrual-based earnings management by enhancing the relationship between supply chain partners and bolstering external monitoring. Additionally, we find that OIO also mitigates the extent of real earnings management undertaken by the supplier firm. These findings remain robust after addressing potential endogeneity concerns. Our results underscore the significant role of OIO within supply chains in curbing both accrual-based and real earnings management by supplier firms.

The impact of boundary conditions on the relationship between value creation and value appropriation in buyer-supplier relationships

Purpose This study aims to investigate whether higher value creation leads to higher value appropriation and to identify the boundary conditions in a buyer–supplier relationship that can explain why a particular supplier can appropriate higher value than others. Design/methodology/approach The study uses questionnaire surveys. The sample of the survey has 150 publicly-listed supplier firms in Taiwan. The unit of analysis is the buyer–supplier relationship. Findings In the buyer–supplier relationship, suppliers’ bargaining power, partnership and a supplier’s original brand manufacturing (OBM) business can strengthen the positive relationship between value creation and value appropriation. Research limitations/implications This study adopts the unilateral viewpoint of suppliers; however, some constructs might require dyadic evaluation. This study only explores the spillover effect of OBM business on the relationship between value creation and appropriation. Practical implications The spillover effect of a supplier’s OBM business in a buyer–supplier relationship allows the buyer to share more common benefits and the supplier to capture more private benefits as compensation. By broadening its customer base, a supplier can increase its bargaining power. A supplier can also maintain a strategic partnership with each essential buyer. Originality/value To avoid the dark-side effect of partnership, the model provides the contingency that a supplier can capture more value from a buyer–supplier relationship.

Drivers and barriers for implementing social sustainability in supply chains: a qualitative investigation of a developing country's multi-tier suppliers

PurposeThe purpose of this paper is to investigate why multi-tier apparel suppliers integrate social sustainability practices into their supply chains and what barriers these suppliers encounter while embedding social sustainability practices.Design/methodology/approachThis study employs a qualitative research design, drawing on data from semi-structured interviews with 46 owners and managers from 33 multi-tier apparel suppliers in Bangladesh, an important outsourcing hub for the global apparel industry. To corroborate research findings, the views of owners and managers were triangulated by further interviewing 11 key representatives of institutional actors such as third-party auditors, a donor agency, industry associations, regulatory agencies and a non-governmental organisation (NGO).FindingsThe authors' findings suggest a range of divergent institutional drivers and barriers – coercive, mimetic and normative – that determine the implementation of multi-tier suppliers' social sustainability practices. The key reported drivers were buyers' requirements, external stakeholders' expectations, top management commitment and competition. Conversely, cost and resource concerns and gaps in the regulatory framework were identified as key social sustainability implementation barriers. In particular, owners and managers of second-tier and third-tier supplier firms experienced more internal barriers such as cost and resource concerns than external barriers such as gaps in values, learning and commitment (i.e. compromise for mutual benefit and non-disclosure of non-compliance) that impeded effective social sustainability implementation.Research limitations/implicationsSocial sustainability in supply chain management has received significant attention from academics, business practitioners, governments, NGOs and supranational organisations. However, limited attention has been paid to investigating the drivers and barriers for social sustainability implementation from a developing country's multi-tier supplier perspective. The authors' research has addressed this knowledge gap.Practical implicationsThe evidence from the authors' study provides robust support for key assumptions of institutional theory and has useful implications for both managers and policy-makers.Originality/valueThe authors' study contributes to the embryonic research stream of socially sustainable multi-tier supply chain management by connecting it to the application of institutional theory in a challenging institutional context.

Small and medium enterprise agro-processing firms supply chain performance: the role of owner-manager’s managerial competencies, information sharing and information quality

PurposeThe study examined the influence of small and medium enterprise (SME) owner-managers' managerial competencies on supply chain performance, the mediation role of information quality on the SME owner-managers' managerial competencies and supply chain performance relationship, the mediating role of information quality on the information sharing and supply chain performance relationship and the mediating role of both information sharing and information quality on SME owner-managers' managerial competences and supply chain performance relationship.Design/methodology/approachData were collected from SME agro-processing firms. The determined sample size for the agro-processing firms was 200, while an effective sample size of 177 was obtained. The Covariance Structural Equation Modelling software was used to obtain results on the influence of SME owner-managers' managerial competencies on supply chain performance, the mediation role of information quality on the SME owner-managers' managerial competencies and supply chain performance relationship, the mediating role of information quality on the information sharing and supply chain performance relationship and the mediating role of both information sharing and information quality on SME owner-managers' managerial competences and supply chain performance relationship.FindingsFindings indicated that a positive significant influence of SME owner-managers' managerial competencies on supply chain performance and the presence of partial mediation effects when the mediating role of information quality in the SME owner-managers' managerial competencies and supply chain performance relationship and the information sharing and supply chain performance relationship is tested. Also, a partial mediating role of information sharing and information quality is obtained in the SME owner-managers' managerial competencies and supply chain performance relationship.Research limitations/implicationsThe study mainly focused on SME agro-processing firms eliminating other SME manufacturing firms. Also, the research employed a wholistic approach when studying the SME agro-processing firms without focusing on how SME owner-managers' managerial competencies would affect information sharing, information quality and supply chain performance based on the market type (local or foreign) and the source of raw materials (local or foreign) and the impact of information sharing on information quality hasn't been given significant attention in the existing literature.Originality/valueThe research focused on the mediation role of quality of information shared by SME owner-managers in the relationship between information sharing and supply chain performance, the mediating role of information quality in the SME owner-managers' managerial competencies and supply chain performance and the mediating role of both SME owner-manager's information sharing and quality of information shared in the relationship between SME owner-managers' managerial competences and supply chain performance. These mediation effects haven't been given significant attention in previous research. Further, while information sharing and information quality have been studied, they have been studied at a supply chain level, not at a managerial level.