Does geographic distance to customers improve or inhibit supplier innovation? A moderated inverted-U relationship

To address the geographic distance-innovation paradox, this study investigates how geographic distance between a supplier and its customers influences supplier innovation and how this effect is further moderated by customer concentration and the institutional development of the supplier's region. A test of the proposed conceptual model, using secondary data from Chinese publicly listed manufacturing firms during 2008-2014, reveals that the geographic distance between a supplier and its customers has an inverted U-shaped relationship with supplier innovation, which is weakened by customer concentration but strengthened by institutional development. These findings reveal the benefits and downsides of the geographic distance to customers, as well as the conditions that influence its effect on supplier innovation.