Deriving efficiency from the major customer network: the role of network connectedness and centeredness
International Journal of Operations & Production Management
ISSN: 0144-3577
Article publication date: 23 May 2023
Issue publication date: 2 January 2024
Abstract
Purpose
Prior studies on major customer relationships (i.e. embedded ties) focus mostly on the ties between a focal firm and its immediate customers, hindering the understanding of the influence of indirect ties (both upstream and downstream) on a focal firm's operational performance. In this study, the authors analyze how a focal firm's upstream and downstream connectedness and network location affect its productive efficiency.
Design/methodology/approach
Utilizing Compustat segment files, the authors constructed large-scale major customer networks covering the period 2007–2013. The authors applied a fixed-effect panel stochastic frontier model to conduct estimation. Moreover, the authors applied an endogenous panel stochastic frontier model to ensure the robustness of the main analysis.
Findings
The authors found that a focal firm's upstream and downstream connectedness both have a positive influence on a firm's productive efficiency, whereas a focal firm's centeredness in the major customer network has a negative influence on productive efficiency. Moreover, it was found that centeredness lessens the positive influences of upstream and downstream connectedness on productive efficiency. The post hoc analysis further confirmed that a focal firm's indirect ties, both upstream and downstream, positively influence a focal firm's productive efficiency.
Originality/value
This study contributes to the literature by evaluating the relative effectiveness of a focal firm's direct and indirect major customer ties, both upstream and downstream. More importantly, this study suggests potential exploitation–exploration trade-offs (i.e. productive efficiency vs. innovation) triggered by a firm's network location.
Keywords
Citation
Kao, T.-W.(D)., Su, H.-C. and Chen, Y.-S. (2024), "Deriving efficiency from the major customer network: the role of network connectedness and centeredness", International Journal of Operations & Production Management, Vol. 44 No. 1, pp. 206-228. https://doi.org/10.1108/IJOPM-09-2022-0563
Publisher
:Emerald Publishing Limited
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