Participate in My Green: How and When Supplier Concentration Affects Firm Green Innovation

ABSTRACT Suppliers play a crucial role in firm green innovation. Although previous studies have explored how suppliers can contribute to firm green innovation, they implicitly assume suppliers' participation in the buyer firm's green initiatives, neglecting to consider whether and under what conditions suppliers are willing to support these initiatives. Given that firms further upstream in the supply chain face less stakeholder pressure for green innovation and their efforts are less visible to the public, suppliers may be reluctant to support buyer green innovation by developing critical green‐related processes and capabilities without sufficient pressure from the buyer. Therefore, we propose that the buyer's power over its suppliers is crucial in determining whether suppliers will support buyer green innovation. Drawing on resource dependency theory (RDT), we examine the impact of supplier concentration, which indicates the extent to which a firm is dependent on key suppliers, on green innovation, and how this effect varies depending on the type of green innovation, market conditions, and firm characteristics. To test our hypotheses, we constructed a dataset consisting of 16,494 observations of 2940 Chinese listed firms from 2008 to 2022. The results show that supplier concentration negatively affects green innovation, with a stronger effect on substantive green innovation than symbolic green innovation. Moreover, this effect is amplified in more competitive industries and for firms with a more negative media reputation. This research contributes to the literature by elucidating how and when supplier concentration affects green innovation, suggesting that dependency on suppliers can inhibit green innovation. The findings complement existing views on the role of stakeholder dependency in green innovation, highlighting the potential conflict among different stakeholders regarding green innovation by a focal firm.