A Capability Perspective on Relationship Ending and Its Impact on Product Innovation Success and Firm Performance

Abstract

How to manage in business relationships due to resource-dependence issues has become one of the most important research topics in management and strategy research. Such business relationships with customers and suppliers are pivotal for the success of collaborative innovation activities and ultimately firm performance. However, business relationship management is most often researched with regard to organizational capabilities in the context of the development of already existing relationships, or the instigation of new ones. Ending business relationships as a managerial activity with strategic importance, and the underlying organizational capabilities enabling such relationship terminations, have not been at the core of research in this area. In order to affect product innovation activities positively, a company must be able to effectively reuse the resources, which have been freed by ending business relationships. Thus, our article focuses on relationship ending capabilities and their impact on product innovation success, as well as overall firm performance. This is carried out empirically in the context of a sample of supplier companies to the Iranian automotive industry. We support our findings by outlining that relationship ending capabilities make available resources, which were previously used in a suboptimal manner, and which can subsequently be used to instigate new or strengthen existing collaborative business relationships with positive 2 effects for innovativeness. We furthermore show that the impact of relationship ending capabilities is amplified by the organizational culture, specifically the attitudes within the focal company regarding acceptance of relationship terminations.

Networking capability in supplier relationships and its impact on product innovation and firm performance

“…Wagner, 2006;Capaldo, 2007), and negative effects on product innovation have been outlined (Moeller et al, 2006). The process of relationship-ending is compatible with the DC perspective that sees sources of competitive advantage as temporary, thereby emphasizing a systematic reconfiguration of firms' strategic focus (Teece, 1997;Zaefarian et al, 2016). In line with the DC, this research treats Supplier Relationship Ending Capabilities (SREC) as the actions or behavioral routines implemented at the firm level oriented towards the systematic withdrawal of supplier relationships that are hampering innovation.…”

“…In line with the DC perspective, we position (2012) and Forkmann et al (2016) posit that NC in supply relationships has three distinctive components, i.e. those behavioral routines aimed at initiating; those aimed at developing; and those aimed at terminating business relationships.…”

“…Mitrega and colleagues (2012) offer the concept of networking capability to capture such dynamic capabilities. While networking capability (NC) as a supplier relationship management capability (Forkmann et al, 2016) and as business relationship process management (Mitrega and Pfajfar, 2015) has been empirically tested in the context of supplier performance improvements, the relationship between NC and firm innovativeness remains unknown.…”

“…In their study, Mitrega et al (2012) provide only general evidence as to the performance-enhancing effect of NC without empirically testing the detailed mechanisms or potential contingency factors. This has recently been addressed in a study by Forkmann et al (2016), but only in the context of supply base performance improvements. We argue that networking capabilities are important for innovation, however, they do not alone guarantee superior performance outcomes, but require an appropriate organizational context, such as relationship proclivity, i.e.…”

Assembling Frameworks for Strategic Innovation Enactment: Enhancing Transformational Agility through Situational Scanning

“…According to (Li et al 2018), a firm's innovativeness is related to its connection with political and economic external stakeholders. Other research emphasizes the liberation of innovation by ending relationships with suppliers who are a source of inertia (Zaefarian et al 2017). Inertia is a counterforce to strategic agility.…”