Interdependence with suppliers in the innovation ecosystem: the effects of supplier concentration on firm innovation

Purpose Based on the strategy and new institutional economic literature, this study aims to explore how different levels of supplier concentration (SC) will be characterized by differences in switching cost and coordinated adaptation in an ecosystem, thereby shaping its research and development (R&D) intensity, innovation performance and innovation efficiency. Design/methodology/approach This study adopted a set of panel data of Chinese listed firms in the Growth Enterprise Board and their top five suppliers from 2012 to 2016. A Tobit model is used to test the hypotheses. Findings The study finds that SC has an inverted U-shape effect on R&D intensity. This finding implies that firms are more likely to invest in R&D when SC is intermediate level. While it has a U-shape relationship between SC and innovation output, both lower SC and higher SC are more efficient in innovation because of their advantage in low switching cost and better coordinative adaptability, respectively. Originality/value The study complements the innovation ecosystem literature by using SC to represent the structure of the interdependence between firms and suppliers in an ecosystem, then examining the correlation between SC and firms' innovation investment and output, respectively. Second, combining strategy and new institutional economic literature, the non-linear effects of SC on firms' innovation are found.