Policy Uncertainty and Customer Concentration

Woon Sau Leung; Jiong Sun

doi:10.1111/poms.13335

Policy Uncertainty and Customer Concentration

¹ University of Edinburgh Business School, 29 Buccleuch Pl, Edinburgh, EH8 9JS, UK · ² Division of Consumer Science, Purdue University, 812 West State Street, West Lafayette, IN, 47907, USA

Production and Operations Management 2021

Using data involving customer–supplier relationships and a large sample of US 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.

DOI: 10.1111/poms.13335
Volume: 30 (5)
Pages: 1517-1542
Language: en
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