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- Title
Does Industrial Cluster Affect Supplier Firms' Cost Structure in the Presence of Major Customers?
- Authors
Chaur-Shiuh Young; Liu-Ching Tsai; Ya-Ching Chu
- Abstract
Taiwan has become a global supply chain base for high-tech products thanks to industrial clusters. The existing evidence suggests that suppliers bear capacity commitments due to major customers' uncertain demand and, as a result, assume a more rigid cost structure. Therefore, this study examines whether industrial clusters affect supplier cost structures in the presence of major customers. We specifically examine whether industrial clusters mitigate the cost rigidity of suppliers driven by major customers. Using a sample of electronic firms listed on the Taiwan Stock Exchange and Taipei Exchange from 2005 to 2019, we find a positive relationship between suppliers' customer concentration and cost rigidity. In particular, we find that industrial clusters significantly mitigate suppliers' cost rigidity driven by major customers. Our results suggest that industry clustering provides more flexible resource sharing. Thus, clustered supplier firms can reduce their fixed cost investments for major customers.
- Subjects
SUPPLIERS; SUPPLY chains; OVERHEAD costs; INVESTMENTS; TAIWAN Stock Exchange Corp.
- Publication
Journal of Accounting Review, 2023, Vol 76, p1
- ISSN
1018-1687
- Publication type
Article
- DOI
10.6552/JOAR.202301_(76).0001