Stuck in the comfort zone? The influence of customer concentration on digital innovation in manufacturing firms

Digital innovation has become an inexorable trend for manufacturing firms in the digital era. Though the motivations for digital innovation have been largely focused on in the literature, the barriers for manufacturing firms to implementing digital innovation remain underdeveloped. Actually, it is not that manufacturing firms are unaware of the benefits of digital technology, but the structural factors embedded in firms that hinder them from adopting digital innovation. In this context, this study aims to empirically investigate how and why customer concentration could be an obstacle to digital innovation in manufacturing firms, and thus provide insights for managers to break free from the trap of customer concentration and turn to embrace digital innovation. By conducting empirical analyses based on panel data of listed manufacturing firms in China between 2008 and 2019, we find that customer concentration has a significantly negative effect on the adoption of digital innovation in manufacturing firms. Moreover, the negative effect of customer concentration on the adoption of digital innovation is more pronounced when top executives have a relatively higher existing-oriented attention focus, and when the firm has spent more on relationship-specific investments. In addition, the presence of chief information officers (CIOs) can weaken the negative influence of customer concentration on the adoption of digital innovation.