Concentrate or Diversify? Unraveling the Effect of Customer Concentration on Green Innovation

Abstract

While the engineering management literature suggests that major customers exert an impact on firms’ engagement in green innovation, there are controversial views regarding the role of customer concentration in affecting green innovation. Drawing upon the knowledge-based view and resource dependence theory, we propose that customer concentration has a nonlinear effect on green innovation. By utilizing a panel dataset of 2718 Chinese listed manufacturing firms from 2001 to 2020, we find that customer concentration has an inverted U-shaped association with green innovation. In addition, market share flattens this curvilinear association, whereas industry competition does not significantly influence this association. Overall, this article contributes to a nuanced understanding of the inverted U-shaped effect of customer concentration on green innovation and the boundary condition that shapes this effect.