Customer concentration, firm R&D investment and moderation effects

Building on resource dependence theory (RDT) and attention-based view (ABV), this research examines the impact of customer concentration on firm R&D investment and the conditional factors. We argue a firm with heavy reliance on a high number of major customers will have a lower level of R&D investment due to loss of discretion in decision-making and increase of operational risks. Moreover, the external factors, competitive intensity, intellectual property right (IPR) protection, and the internal factor, the firm’s management myopia, will exacerbate the negative effect. Findings from a large sample of A-share listed firms in Chinese stock markets 2008–2017 (14,203 firm-year observations) support our hypotheses. This research adds to the customer concentration studies and RDT literature by uncovering a dark side of firms’ concentrated customer base and the situational factors that strengthen this effect. It also marks an early empirical analysis of ABV-based prediction.