Firms have increasingly relied on their supply network for improving their innovation performance. Although the relationship between the supply network structure and innovation has been investigated, the link between supply network complexity and a firm's innovation remains unexplored. By employing transaction cost economics and the concept of a recombinatory search, we propose that the complexity dimensions (horizontal, vertical, and spatial complexity) of a supply network impact the innovation performance of a firm and that such relationships are moderated by a strategic emphasis on value creation and the influence of the firm over the supply network. With a large-scale network data of 201 firms across six industries and 20 countries, we take a robust empirical approach that accounts for endogeneity, unobserved heterogeneity and intrafirm error correlation to test our theory. We find strong support for a nonlinear relationship (with diminishing growth) between both horizontal and vertical complexity with respect to innovation performance. We find that spatial complexity is negatively related to innovation performance. Additionally, we find that a firm's strategic emphasis and its influence indeed moderates the link between the complexity dimensions and innovation performance. Based on our findings, we offer specific managerial guidance for the effective implementation of sourcing practices.
The literature on marketing, operations management, and strategy has investigated the impacts of a firm’s supplier network structure and complexity on its financial, environmental, and innovation performance. However, our understanding of how the global supply chain complexities of a multinational enterprise (MNE) affect its international business performance (IBP) is limited. We draw on both the business network theory and information search literature to propose that the various complexity dimensions (e.g., horizontal, vertical, and spatial) of an MNE’s global supply chain have different influences on its subsequent IBP. We argue – and empirically validate – that collaboration, a network orchestration mechanism, enables an MNE to leverage the benefits of complex relationships. Using a dataset of 185 firms taken from multiple industries over 6 years, we show how such complexities have differential effects. In multiple post hoc analyses, we demonstrate how an MNE’s marketing intensity, the interconnectedness among its supply members, and its top management team (TMT)’s international experience all have unique impacts. This study contributes to the existing literature on global supply chain complexity by demonstrating how it can influence MNEs’ IBP. Moreover, we contribute to the strategic IBP literature by outlining effective global supply chain improvement strategies.
Supplementary Information
The online version contains supplementary material available at 10.1057/s41267-021-00497-0.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.