Customer Concentration and Business Entertainment Investment: Evidence from Chinese Listed Firms

This study explicates the strategic impetus behind business entertainment investments from the resource dependence perspective. In particular, we propose that business entertainment investment is an embeddedness strategy, responding to the customer concentration (e.g.: a firm’s sale is attributed to at least one major customer). The business entertainment practice enables the focal firm to cope with the dependence on major customers through building up relational capital with them and with other critical stakeholders who could also influence the dyadic relationship between the focal firm and its major customers. Such a positive relationship between customer concentration and business entertainment investment is weakened when the firm has more market power such as it is state-owned and the market share is high. However, market complexity strengthens the main relationship.