Customer-Base Concentration, Investment, and Profitability: The US Government as a Major Customer

• 成果类型: Article
• 署名作者: Cohen, Daniel A.; Li, Bin
• 署名单位: Texas A&M University System; Texas A&M University College Station; University of Oklahoma System; University of Oklahoma - Norman
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-52490
• 发表日期: 2020
• 页码: 101-131
• 关键词: supplier relationships; corporate suppliers; cost; INFORMATION; externalities; determinants; uncertainty; incentives; governance; allocation

摘要

We examine whether customer-base concentration has a differential impact on profitability for firms contracting with major government customers versus firms contracting with major corporate customers. We document that firm profitability increases with the concentration of major government customers, but decreases with the concentration of major corporate customers. We attribute the contrasting results to the differential impact of major government and corporate customers on demand uncertainty. Specifically, firms contracting with major government customers face lower demand uncertainty that enables them to realize more efficiency gains from customer-specific investments, whereas firms contracting with major corporate customers are exposed to higher demand uncertainty that reduces the efficiency of customer-specific investments. Overall, our study suggests that major government customers are unique and important in the composition of customer base, and they impact firm outcomes in a significantly different way than major corporate customers.