Can supplier innovations substitute for internal R&D? A multiple case study from an absorptive capacity perspective

Abstract

Prior literature suggests that significant internal R&D resources are needed to leverage suppliers for innovation and that external knowledge sources can be used to complement the internal knowledge base. Based on the analysis of four inbound open innovation projects at Fortum, a multinational energy utility company, we argue that companies with low R&D intensity may adopt an alternative approach which aims at substituting -not merely complementing -internal R&D with external innovations. We adopt the absorptive capacity perspective while investigating the cases and focus on four distinct capabilities: acquisition, assimilation, transformation, and exploitation. We find that the substitution approach consists of short-term research on new technological areas in order to gain the ability to identify and evaluate alternative technologies, as well as joint business models and operations based on complementary capabilities between the parties. The cases also suggest that the innovation process requires significant collaboration and the buying company's supplier management capabilities may improve the success of inbound open innovation projects of this type.

Exploring early purchasing involvement in discontinuous innovation: A dynamic capability perspective

“…Our second proposition extends the study of Schiele (2010) and Pihlajamaa et al (2017) by illustrating how proactive innovation meetings can create a "learning atmosphere." Organized by purchasing managers, these meetings were shown to facilitate exploration, communication and integration of technical knowledge exchanges between R&D and suppliers.…”

“…Similar to Wagner (2012), we contend that there is a need for more research that derives practical advice on how purchasing can adapt existing practices when companies embark on discontinuous innovation projects. Arguably, there are numerous implications for purchasing departments, as the role of purchasing agents in managing sourcing and supplier relationship is becoming more common and visible in firms' innovation strategies (Luzzini et al, 2015;Pihlajamaa et al, 2017).…”

Enhancing quality and innovation performance: the role of supplier communication and knowledge development

“…The firms' main intention is to utilise the suppliers' specialised knowledge in their know-how projects to reduce time to market (Aloini et al, 2015) and increase the frequency of new products to market (Rosell & Lakemond, 2012). Manufacturers often move beyond just acquisition and sharing supplier knowledge towards integration with redesign and improvement of existing processes (António Carrizo Moreira & Ferreira, 2018;Calvi et al, 2018;Pihlajamaa et al, 2017;Wlazlak et al, 2019) or early engagement in new product development (Chesbrough, 2010;Laursen & Andersen, 2016;Rosell & Lakemond, 2012). These practices have been examined in relations with supplier integration, which enhances the speed to markets and the rate of innovation (Cavusgil et al, 2003;Ritala et al, 2015).…”

“…SCO reflects the flow of communication from suppliers on strategic and operational information such as market demand (McCarthy Teresa & Golicic Susan, 2002), technical information, propriety and details and more confidential information such as patents or knowhow (Pihlajamaa et al, 2017;Slater et al, 2014). Information on demand and order information facilitate supplier planning, reduce information distortion, and lower stock levels (Klein & Rai, 2009).…”

“…upstream quality) plays important role in the total quality management or so-called supply chain quality (Zeng et al, 2013). Although supply chain quality and innovation have been dominant in operations research (António Carrizo Moreira & Ferreira, 2018;Wiengarten et al, 2017), in practice many of these interactions happen only in the focal manufacturing firm rather than extending to upstream and downstream operations (Phan et al, 2019;Pihlajamaa et al, 2017). Quality management needs to be implemented outside the manufacturing firms and requires communication, collaboration, and integration with upstream and downstream supply chain members (Teoman & Ulengin, 2017;Zeng et al, 2013).…”