Customer‐based Concentration and Firm Innovation

Abstract Based on a sample of listed companies in Shanghai and Shenzhen, China from 2007 to 2015, this paper discusses the relationship between customer concentration and corporate innovation. The results show that this relationship is nonlinear and U‐shaped. In addition, this paper finds that when the bargaining power of large customers is weak and the level of supply chain integration is high, the U‐shaped relationship becomes more significant. Additional analyses show that the U‐shaped relationship between customer concentration and corporate innovation is more significant for non‐state‐owned enterprises and those with lower levels of cash holding.