Supplier Innovation Strategy and Performance: A Matter of Supply Chain Market Positioning

Document Type

Article

Publication Date

8-2018

Publication Title

Decision Sciences

DOI

10.1111/deci.12283

ISSN

1540-5915

Abstract

Extant research consistently illustrates the positive benefits customers get from having more innovative suppliers. However, do suppliers benefit financially from positioning themselves as leading innovators? Utilizing a secondary dataset of 1039 supplier to customer base observations, and grounding our study in the structure‐conduct‐performance framework, we examine the extent to which suppliers are able to benefit from pursuing a more leading or lagging innovation strategy within their industry. While in general we find that suppliers employing a leading innovator strategy have higher levels of financial performance, such an effect is not universal. Rather, the ability of the supplying firm to leverage their innovation strategy into increased performance is highly contingent upon not only the innovation levels of their own industry, but also the innovation levels of the industries which they supply. Our results, therefore, suggest that it would be advantageous for suppliers to take a supply chain perspective and strategically incorporate the innovation characteristics of their customers when determining whether to pursue a leading or lagging innovation strategy.

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