Double-edged sword effect of customer concentration on the adoption of industrial robots

Abstract

In this study, we treat robots as relationship-specific assets and analyze the effects and economic consequences of customer concentration on their adoption by Chinese listed firms in the manufacturing industry. Customer concentration may affect the adoption of industrial robot through positive cooperative effect or negative risk effect. Overall, we find that customer concentration positively affects this adoption. The results remain robust after controlling for endogeneity. We also demonstrate that this effect is more significant in firms with low R&D investment intensity that indicates the specialized investment in industrial robots based on the needs of major customers can replace the R&D investments for that purpose. Further analysis shows that the positive effect of customer concentration on the adoption of industrial robots is stronger for the firms in areas with high-speed rail and who have stronger bargaining power and lower investment irreversibility. These findings indicate that the effects of intensified cooperation and weaker risk will increase the positive association between customer concentration and the adoption of industrial robots by firms. Further, consistent with the cooperation effect, the adoption of industrial robots based on large customers improves a firm's total factor productivity.