Supplier geographical concentration and corporate innovation

Firms should stabilize their supply-chain relationships and rely more on innovation-driven development strategies in the post-pandemic period. This study explores the effect of suppliers’ geographical concentration on corporate innovation. Using data on A-share listed firms in China from 2007 to 2020, we find that suppliers’ geographical concentration significantly and negatively affects corporate innovation. Furthermore, the channel test results show that suppliers’ geographical concentration restrains corporate innovation primarily through their strong bargaining power and by exacerbating the firm's financing constraints.