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Product Market Competition and Corporate Relocations: Evidence from the Supply Chain

Author

Listed:
  • Chen Chen

    (Department of Accounting, Monash Business School, Monash University, Caulfield East Victoria 3145, Australia)

  • Sudipto Dasgupta

    (Department of Finance, Chinese University of Hong Kong, Shatin, New Territories, Hong Kong; Asian Bureau of Finance and Economic Research, Singapore 117592; Center for Economic and Policy Research, Washington, District of Columbia 20009; European Corporate Governance Institute, 1000 Brussels, Belgium)

  • Thanh D. Huynh

    (Cbus Super Fund, Melbourne Victoria 3000, Australia; Department of Banking and Finance, Monash Business School, Monash University, Caulfield East Victoria 3145, Australia)

  • Ying Xia

    (Department of Banking and Finance, Monash Business School, Monash University, Caulfield East Victoria 3145, Australia)

Abstract

We show that intensified competition changes the location of business activity and, in turn, affects supply chain relationships. Using establishment-level data, we find that, when upstream product markets become more competitive, suppliers are more likely to relocate their establishments closer to customers. Following the supplier’s relocation, its sales to the customer increase, its relationship with the customer is less likely to be terminated, and its innovation is more aligned with the customer’s innovation. The relocated supplier also experiences more analyst following and institutional ownership that are in common with the customer and is more likely to issue equity than debt. However, the improved relationship, by causing the supplier to engage more in innovation dedicated to the customer, adversely affects creative innovation, which is known to drive growth.

Suggested Citation

  • Chen Chen & Sudipto Dasgupta & Thanh D. Huynh & Ying Xia, 2023. "Product Market Competition and Corporate Relocations: Evidence from the Supply Chain," Management Science, INFORMS, vol. 69(9), pages 5147-5173, September.
    • Handle: RePEc:inm:ormnsc:v:69:y:2023:i:9:p:5147-5173
    DOI: 10.1287/mnsc.2022.4586
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