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Policy Uncertainty and Customer Concentration

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  • Woon Sau Leung
  • Jiong Sun

Abstract

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.

Suggested Citation

  • Woon Sau Leung & Jiong Sun, 2021. "Policy Uncertainty and Customer Concentration," Production and Operations Management, Production and Operations Management Society, vol. 30(5), pages 1517-1542, May.
    • Handle: RePEc:bla:popmgt:v:30:y:2021:i:5:p:1517-1542
    DOI: 10.1111/poms.13335
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    References listed on IDEAS

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    7. Chun Lu & James Routledge & Kam C. Chan & Tongxia Li, 2023. "Policy uncertainty and inventory behavior: Evidence from the US manufacturing sector," Economics and Politics, Wiley Blackwell, vol. 35(3), pages 919-948, November.
    8. Zhang, Jiping & Mo, Haimiao & Hu, Zhijian & Zhang, Tianjiao, 2024. "The effect of stability and concentration of upstream and downstream relationships of focal firms on two-level trade credit," International Journal of Production Economics, Elsevier, vol. 270(C).
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    10. Zhang, Da & Wang, Yuxia, 2024. "Can management tone predict the firm's decision on supply chain configuration?," Finance Research Letters, Elsevier, vol. 62(PB).
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