Supplier Concentration and Firms' Environmental Performance: Evidence From China

ABSTRACT Growing environmental problems and the awakening of public environmental awareness have led to a global green movement and increased attention to firms' environmental performance (EP). However, few studies have focused on how and when supplier concentration (SC) affects firms' EP. In the institutional context of China, this study explores the intrinsic mechanism through which SC acts on EP and its heterogeneous relationship from a relational perspective. Empirical tests are conducted via a dataset of Chinese listed companies from 2008 to 2022. We find that SC contributes significantly to firms' EP, and this effect has a long‐term effect. Moreover, trade credit, innovation ability, and human capital constitute important transmission channels for these results. In addition, we find that the positive effect of SC on firms' EP is more significant when the firms are non–state owned or located in regions with better transportation infrastructure and digital transformation. By exploring for the first time the important role of SC in predicting a firm's EP, this study provides new insights into the literature.