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Effects of customer unionization on supplier relationships and supplier value

  • Hyemin Kim Department of Finance, School of Business, Hanyang University
I examine whether suppliers modify trading strategies upon their customers’ unionization. I demonstrate that when customers unionize, suppliers experience negative stock returns and rely less on the unionized customers for sales. Results are robust to alternatively using a regression discontinuity design. Suppliers reduce their exposure to unionized customers due to the demand uncertainty arising from potential labor disruptions, the customers’ reduced competitiveness in the product market, and customers’ potential shifting of unionization costs to suppliers. However, in certain cases, customer unionization mitigates the negative effect of customers’ default risk on their relationship with suppliers.

  • Hyemin Kim
I examine whether suppliers modify trading strategies upon their customers’ unionization. I demonstrate that when customers unionize, suppliers experience negative stock returns and rely less on the unionized customers for sales. Results are robust to alternatively using a regression discontinuity design. Suppliers reduce their exposure to unionized customers due to the demand uncertainty arising from potential labor disruptions, the customers’ reduced competitiveness in the product market, and customers’ potential shifting of unionization costs to suppliers. However, in certain cases, customer unionization mitigates the negative effect of customers’ default risk on their relationship with suppliers.
transaction cost,labor union,supplier,trading relationship