The effect of customer and supplier concentration on firm productivity: The moderating role of the firm's dominant position in the supply chain network

The productivity of firms operating in supply chain networks is influenced not only by their vertical upstream and downstream partnerships, but also by the characteristics of broader network relationships. While direct partnerships play a critical role in shaping the focal firm's productivity, the impact cannot be fully understood without incorporating the broader network context in which the firm is embedded. Drawing on perspectives of resource dependence theory and embeddedness theory, this study explores how power dynamics within a firm's direct partnerships, as proxied by customer and supplier concentration, affect firm productivity, and how a firm's dominant position in the supply chain network moderates these impacts. The empirical analysis supports the standpoint that higher customer or supplier concentration leads to power imbalances within direct partnerships, triggering predatory effects that undermine the focal firm's productivity. In addition, a firm's stronger dominance in the supply chain network alleviates these adverse impacts. The mechanism tests reveal that, for firms with greater network dominance, maintaining a more concentrated customer base mitigates productivity losses by easing innovation constraints and accelerating operational turnover, whereas maintaining a concentrated supplier base contributes to productivity only through operational turnover enhancement. This research enriches the literature by offering new insights into the power dynamics within triadic partnerships and network relationships.