Convergence vs. divergence: the asymmetric impact of common suppliers and customers on investment similarity

This study investigates the impact of common suppliers and common customers on the investment similarity between intra-industry peer firms. Using a sample of Chinese listed firms, we find that firms sharing common suppliers exhibit greater investment convergence, a pattern consistent with technological lock-in, especially when asset specificity and supplier concentration are higher. In contrast, firms with common customers display investment divergence, especially when product market overlap and firm-level competition are higher, reflecting strategic differentiation. This upstream convergence is stronger for geographically proximate firm pairs, while the downstream divergence is more pronounced in the presence of common institutional ownership. These findings suggest that common suppliers impose operational constraints, while common customers shape strategic positioning.