Abstract:Based on the supplier customer relationship, this paper investigates the effect of customer stability on firm cost stickiness. The result indicates that customer stability can significantly improve firms cost stickiness, which survives a series of robustness checks including Heckman two step estimation, PSM, DID and controlling for other potential influencing factors. Mechanism tests show that customer stability can affect cost stickiness by changing suppliers adjustment costs and improving managers’ optimistic expectations. Cross sectional analyses reveal that the association between customer stability and cost stickiness is stronger with higher level of social trust, better supplier customer relation and larger economic policy uncertainty index. The economic consequences show that the cost stickiness induced by customer stability has promotion effect on firm’s ratio of sales in the future, which is a reflection of supplier firms’ resources storage and strategic cost behavior. This paper extends the research on cost stickiness in view of supply chain, which provides experience value and practical reference for a better understanding of supply chain management and firm cost decision making.