This study examines how product market concentration influences firms’ supplier network design, focusing on three critical dimensions: buyer-supplier network complexity, industry diversity, and community diversity. As market concentration increases, firms face a trade-off between consolidating supplier relationships for operational efficiency and diversifying their networks to mitigate risks and enhance resilience. Using a comprehensive dataset of buying firms from 2003 to 2020, we provide empirical evidence on these dynamics. Our findings reveal that higher product market concentration is associated with reduced supplier differentiation across all three dimensions. Specifically, firms in concentrated markets tend to consolidate their supplier base, source inputs from fewer industries, and focus on relationships within a smaller number of supplier network communities. These results highlight the dominant role of consolidation for efficiency and trust-building in concentrated markets, even as potential risks from reduced diversity remain. This study contributes to the literature on supply chain management and operations strategy by linking macro-level market structures to micro-level supply chain design. It also introduces advanced network analytics to identify supply community structures, offering novel insights into the interplay between market concentration and network design. Implications for balancing efficiency and resilience in supply chains are discussed.
