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Selling to Godzilla: Evidence on the Performance Implications of having Wal-Mart as a Major Customer
Perry W Solheim,
Montana State University - Bozeman
Taylor Randall, University of Utah
Mike Lemmon, University of Utah
ABSTRACT. The popular press is littered with suggestions that strong retailers such as Wal-Mart exert undue influence on their suppliers. Theory, however, is conflicted in its predictions about the influence of a major customer on the economic performance of suppliers. We explore the accusations of popular press and the competing predictions of theory using a sample of suppliers from Wal-Mart Corporation. On average, we find little association between the influence of Wal-Mart as a major customer and the performance of suppliers. Rather we find that firms developing significant relationships with Wal-Mart are different from industry peers before entering the relationship. On average these firms outperform industry peers. However, in cross sectional analysis we find some evidence that supplier power relative to Wal-Mart does have an association with supplier performance.
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