Does customer concentration hinder or enhance manufacturing firms’ ESG performance? Customer concentration, manufacturer industry competition and ESG performance

Purpose Despite substantial efforts to understand the determinants of environmental, social and governance (ESG) performance in manufacturing firms, the role of supply chain-related factors, such as customer concentration, remains underexplored. Drawing on resource dependence theory, we aim to develop a theoretical framework that examines the relationship between customer concentration, manufacturer industry competition, and ESG performance. Design/methodology/approach To test hypotheses, this study utilizes a panel ordinary least squares regression using 10,348 samples from manufacturing firms in the U.S. between 2002 and 2020. Two-stage least squares (2SLS) regression and propensity score matching (PSM) analysis are also conducted for robustness, in addition to a supplementary analysis that disaggregates ESG into its subdimensions. Findings While customer concentration negatively impacts manufacturing firms’ ESG performance, this relationship is moderated by manufacturer industry competition. Furthermore, depending on the level of manufacturer industry competition, customer concentration may either hinder or enhance ESG performance. Specifically, customer concentration hinders ESG performance under high manufacturer industry competition but enhances it under low manufacturer industry competition. Originality/value This study underscores the critical yet nuanced role of customer concentration in shaping manufacturing firms’ ESG performance by introducing an external factor that frames the context for various dynamics in the supply chain.