Policy uncertainty and customer concentration

Woon Sau Leung, Jiong Sun

Research output: Contribution to journalArticlepeer-review

Abstract

Using data involving customer-supplier relationships and a large sample of U.S. publicly listed firms, our study documents a negative and statistically significant relationship between economic-policy uncertainty and firms’ customer-base concentration. The negative relation is predominant in firms with higher inventory efficiency and those operating in competitive, high-R&D, and nondurable industries. Customer-base diversification is further shown to enhance firm performance during periods of increasing policy uncertainty, but not when policy uncertainty decreases. Overall, our evidence suggests that firms respond to increasing policy uncertainty by diversifying their customer base and such behavior contributes positively to firm performance.
Original languageEnglish
JournalProduction and Operations Management
Early online date12 Jan 2021
DOIs
Publication statusE-pub ahead of print - 12 Jan 2021

Keywords

  • customer-base concentration
  • economic policy uncertainty
  • firm performance
  • customer-supplier relationships
  • customer-base diversification

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