This study investigates the resource role of multiple large customers (MLCs, firms have at least two customers who account for at least 10% sales proportion) in firms’ innovation.
Using a sample of Chinese A-share listed firms from 2007 to 2023 and drawing on the resource-based and resource-dependence theories, we compare the innovation outputs of firms having MLCs with those of firms having no or a single large customer.
Firms with MLCs have lower innovation outputs. This negative effect is more pronounced for firms without political connection, with lower managerial ability, and in the technology-intensive and competitive industries. MLCs play the internal resource appropriation role in impeding firms’ innovation outputs by requiring more trade credit with longer payment periods, curtailing R&D investment volumes and growth, and distracting management attention on innovation. We also reveal that the sales balance between MLCs hinder firms’ innovation outputs. MLCs hamper firms’ substantial and strategic innovation outputs, reduces innovation efficiency, and lowers innovation quality.
Overall, our study implies that MLCs are the internal resource appropriators manifested in the reduction of firms’ innovation output, efficiency and quality.
We delve into the customer structure of MLCs and uncover the conflicts of interest among MLCs by competitively appropriating firms’ internal resources to advance their own interests, which introduces a novel research avenue on large customers and customer structure from the perspective of MLCs. We are the first to explore the effect of MLCs on firms’ innovation, thereby contributing to the literature on the drivers of firms’ innovation from the perspective of MLCs and large customer structure. Our study reveals that the effect of large customers depends on the structure of large customers, which contributes to providing novel implications for the debate on large customers.
