The vast majority of the supplier innovation literature has focused on how buying firms can effectively “pull” innovations from their suppliers. Yet, we know remarkably little about the factors that contribute to a supplier voluntarily “pushing” innovations to its customers. The present study addresses this research gap in the context of industrial buyer–supplier relationships and with a specific focus on relationship-specific investments. Drawing on theory from the relationship-marketing literature and on transaction cost theory, we devise and test a proposed theoretical model that links the level of a supplier's relationship-specific investments to its sharing of innovative ideas regarding products and processes with customers. The model also considers the role of contract length, relationship age, and buyer–supplier cooperation as possible safeguards. The empirical results suggest that a supplier's relationship-specific investments encourage a supplier to suggest ideas of process innovations but to refrain from suggestions about product innovations. The latter effect, however, can be attenuated by appropriate formal and informal safeguards.
In many industries, buying firms do not only rely on the manufacturing capabilities of their suppliers, but also recognize that “[s]uppliers have become an increasingly important source of product and process innovation” (Azadegan and Dooley, 2010, p. 488). Accordingly, a considerable amount of research has focused on how buying firms can identify relevant innovations at their suppliers (Dyer and Singh, 1998), use a variety of supplier integration and development initiatives to stimulate supplier innovations (Perols et al., 2013 and Petersen et al., 2005), and integrate and utilize these innovations in their own new product development efforts (Koufteros et al., 2005 and Song and Di Benedetto, 2008). Essentially, the vast majority of the findings contribute to the “pull model” of supplier innovation where the buying firm is the active party that takes the initiative to receive a higher output of supplier innovation.
While this stream of research has generated very valuable insights, our knowledge about the inverse direction of supplier innovation, namely the mechanisms that drive suppliers to take the initiative and voluntarily offer and push innovations to their customers, is still relatively limited (Monczka et al., 2010 and Schiele, 2012). The automotive industry serves as a showcase for the importance of this alternative “push model” of supplier innovation, and at the same time for the inability or failure of some automotive manufacturers to motivate their suppliers to share urgently needed technology (e.g., for new lightweight materials and components). An annual supplier survey in the North-American automotive supplier industry reveals that over many years, suppliers to Toyota, Honda, and Nissan were more willing to share innovations with their customers than suppliers to GM, Ford and Chrysler (Henke and Zhang, 2010). One observation that Henke and Zhang (2010, p. 43) have made is “that automotive suppliers reserve their most advanced technological innovations for customers with which they have trusting working relations.”
However, the type (e.g., arm's length vs. relational) or climate of the exchange relationship is likely not the only factor that plays an important role when suppliers voluntarily decide to share innovations with specific customers. In this article, we argue that a key factor in determining whether or not suppliers actively suggest innovative ideas – i.e., push both process and product innovations – to customers is the level of the suppliers’ relationship-specific investments (RSI). Suppliers commonly make such investments to support the sales of their products within important relationships (Frazier et al., 2009 and Kang et al., 2009). Since innovation push can hardly be explicitly contracted (i.e., it rests on the discretion of the supplier), rational suppliers will share innovative ideas only if they believe that doing so will generate future benefits or, at least, will not worsen their current position. In particular, suppliers will have a strong incentive to protect the cumulative future benefits stemming from existing RSIs. This rationale, however, conflicts with the push of innovations which potentially changes the setup of the relationship and endangers the usage and future value of existing RSIs.
In this study, we address this problem within an industrial business-to-business context and investigate how buying firms can improve the likelihood that suppliers will provide them access to innovative ideas in the presence of supplier RSIs. Drawing on theory from the relationship-marketing literature and on transaction cost theory, we hypothesize and test – based on a sample of 367 industrial buyer–supplier relationships – a proposed theoretical model that links the level of a supplier's RSIs to the extent the supplier suggests process and product innovations, and considers the role of contract length, relationship age, and buyer–supplier cooperation as safeguards. The results provide considerable support for our model and yield important scholarly and managerial implications.
The remainder of this article is structured as follows. To gain a better understanding of supplier innovation sharing, we start by delineating the differences between process and product innovations. This is followed by the development of the hypotheses. Next, we describe the research methodology and present the results. The remaining sections discuss the results from scholarly and managerial perspectives. The article concludes by describing the limitations of the study and by making recommendations for future research.
A large body of literature exists on innovation sharing in buyer–supplier relationships. Most of this literature, however, has focused on the question of how buying firms can “pull” innovations from their suppliers. This stream of research has generated very valuable insights, yet, we know remarkably little about when suppliers “push” innovations to their customers. The present study stresses the important differences between process and product innovation sharing, and sheds new light on the role of supplier relationship-specific investments and safeguards for these investments for supplier innovation sharing.
