For companies operating under unfavorable macroeconomic conditions, such as high wage/high tax countries in central Europe, innovation has become a central theme for survival. If there is one thing that has changed in innovation management during the last decade, it is the growing reliance on external sources of technology. As a consequence, a new task for purchasing arises, as firms need to understand which suppliers actually do have high potential contributing to the innovativeness of the firm and which do not. This paper focuses on the conceptual basis and derives propositions on the nature of innovative suppliers: specialized, technically competent firms, located in the proximity of the buyer, being embedded in a trusted and intensive relationship are identified as having a higher probability to be the core innovative suppliers. These criteria can serve to refine strategic sourcing decisions and improve communication between engineering and purchasing professionals.
All eight propositions can serve as indicators for analyzing a firm's existing portfolio of suppliers, e.g. as part of a campaign to increase innovativeness or also with an exercise to reduce the number of suppliers. If the intention is to compare potential suppliers who are completely new, only P1–P3 and P6–P7 may be selected, because no relationship exists, so far, which thus cannot be part of the assessment. Based on the above discussion, focusing on the path following type of innovation, a picture of a supplier greatly advancing a firm's process of innovation matures: Ideally, it is a specialized, technically competent firm located in proximity to the buyer and taking part in a joint improvement and development program. An intensive and trusted relationship has evolved over a long period of time.
Buyers may want to become the “preferred customer” of such valuable suppliers, ensuring their prime commitment, which “…implies that the manufacturer has to present itself as a kind of supplier to its supplier…” ( Wynstra et al., 2003, p. 74). However, analyzing the identified characteristics of innovative suppliers, one striking feature comes into view: there may be a limited choice in establishing innovative relationships on short notice. If a firm misses a competent supply base to which it is linked in long-term and trusted exchange relationships, it may first have to take the time to create it in order to enjoy continuous innovative input from the suppliers. Creating a network of innovation-suppliers is a new direction for supplier development programs. It also requires more long term planning for the supply base. Dissolving long-term relationships, on the other hand, may be paid for with a reduction on the level of the buyer's innovativeness. To prevent this effect, a buyer may find it helpful to distinguish between strategically relevant “innovation-suppliers” and easily replaceable “cost-suppliers” when analyzing the supply base. Both should be addressed by different means, the selection of innovation-suppliers including the above distilled criteria in addition to the more common price, quality and logistic evaluation criteria. Such an approach can also objectify the discussion between technical and commercial issues, often represented by engineering and purchasing personnel. Eventually, the findings also support the thesis derived from a resource based view of the firm that the proximate environment of a firm, including its network of innovative suppliers, can enhance – or limit – its competitiveness, thus being a valuable resource difficult to imitate ( Duschek, 2004, Dyer and Singh, 1998 and Steinle et al., 1998). These implications sum up the need of purchasing to expand its scope of analysis in supplier selection. Identifying suppliers that become innovative by collaborating with the buyer is a new task for strategic sourcing.
Finally, lending empirical support to the picture of an innovative supplier as deduced above would be a logical next step in research. Regarding methodological issues on future research design, this could either be done by case study research or via a broad quantitative verification or a combination of the above. One form of quantitative confirmation could be to ask managers to indicate the criteria they use for choosing innovative suppliers or to indicate in how far they agree with the above developed propositions. However, it is not sure if the results of such a questionnaire would correctly identify the characteristics of innovative suppliers. Verma and Pullman (1998) undertook an experiment by asking purchasing managers to indicate their supplier selection criteria and then apply this to 16 experimental supplier selection situations. “The results indicate that although managers say that quality is the most important attribute for a supplier, they actually choose suppliers based largely on cost and delivery performance” (Verma & Pullman, 1998, p. 739). So, asking for selection criteria may rather illustrate the intentions of the person answering rather than reflecting the reality of choice. Therefore, it seems preferable to try to identify the characteristics of the most innovative suppliers that are already working for a firm. Such a design would also overcome one of the limitations of the main body of research in the field of supplier integration, namely the focus on single projects rather than a comprehensive view of suppliers (Wynstra et al., 2003). Moving away from a single project perspective would require the managers first to make up their minds as to who actually are their most innovative suppliers and then analyze their characteristics, maybe even contrasting them with the typical un-innovative supplier.
A validated understanding of which suppliers are contributing with innovations and which are unlikely to do so paves the way for a constructive discussion between purchasing and engineering on supplier selection and ultimately offers a substantial contribution to a firm's competitive advantage: with a growing reliance on external partners for innovative solutions, privileged access to innovative suppliers stands at the core, being one of the characteristics for distinguishing between successful and less successful firms.
