Does Relationship Matter? Buyer-Supplier Relationship and the Association between Supplier Concentration and Cost Structure

We examine the association between supplier concentration and cost structure and how such association varies with the nature of buyer-supplier relationship. We predict a positive association between supplier concentration and cost elasticity. Furthermore, we predict that the positive association is less pronounced when there is a more cooperative buyer-supplier relation. We test our predictions with hand-collected data from the supplier information disclosed by Chinese listed firms. Using three proxies for buyer-supplier relationship: buyer firm ownership structure (state-owned enterprises vs. non-state-owned enterprises), the length of buyer-supplier relationship, and enterprise trustworthiness, we find results consistent with our predictions. Our study contributes to the cost management literature and interfirm relationship literature by showing that the relation between supplier concentration and cost structure varies with the nature of buyer-supplier relationship.