Managing firm risk through supply chain dependence: an SME perspective

Purpose The purpose of this study is to conduct an empirical investigation into the impact of supply chain dependence (including customer dependence and supplier dependence) on credit risk through the lens of social network theory (SNT) by focusing on how to manage firm risk using supply chain relationships in the context of Chinese small and medium-sized enterprises (SMEs). Design/methodology/approach Using data from public databases, this study selects a unique sample from a Chinese SME board and uses an ordered logistic regression model to investigate the relationship between the dependence on major customers or suppliers and both credit risk and credit rating. It is found that the results are robust to the use of different empirical methods. Findings The main findings of this study are that a firm’s dependence on major customers is positively related to its credit risk but negatively related to its credit rating, while a firm’s dependence on major suppliers is positively related to its credit risk but negatively related to its credit rating. Originality/value To broaden the understanding of industrial marketing and purchasing, this study contributes to research on supply chain relationship management and risk management by focusing on SMEs’ dependence on major customers and suppliers and empirically examining the influence of this dependence on both credit risk and credit rating in an emerging market.