Customers’ Negative Managerial Expectations and Suppliers’ Dual Innovation: Evidence from China

This study analyses the correlation between customers’ negative managerial expectations and suppliers’ binary innovations under supply chain risk scenarios. The findings suggest that suppliers are more likely to promote radical rather than incremental innovation when customers express negative managerial expectations. Customers’ negative managerial expectations are more likely to encourage breakthrough innovations if the supplier has weaker bargaining power, lower financial constraints, higher tolerance for innovation failure, and is located in a more competitive market region. Mechanism tests indicate that customers’ negative managerial expectations increase suppliers’ business risks and stimulate suppliers to engage in breakthrough innovations. Economic consequences tests suggest that when customers hold negative expectations about the future, suppliers’ breakthrough innovation increases their industry position and product novelty. This study provides empirical evidence that helps firm management to improve supply chain innovation to address customer risk.