Innovating With Dominant Suppliers: Lessons From the Race for Laser Light

Abstract

Traditionally, manufacturers could usually choose from several suppliers who would be more than willing to engage in innovation processes with them. However, more often the situation arises that a supplier has a dominant position because of a clear leadership or even exclusivity in a certain technology. How should the buying companies handle such situations when a supplier can choose the customer to collaborate with, rather than cueing in front of the customer’s door? This paper focuses on how a buying company may best handle this situation of innovating with dominant suppliers. The methodology used is a case study that compares, from an original equipment manufacturer’s perspective, two implemented supplier innovations with different expirations — a success case and a failure. Findings lead to three main propositions: First, firms may benefit from carefully analysing and designing the buyer–supplier constellation in innovation processes and not only the quality of the innovation. Drawing back on attractiveness theory grounded in social exchange theory may provide clues on how to do so. Second, in case of a dominant supplier situation, traditional innovation management processes may fail and need to be amended by a dedicated innovation process with a different order of steps. In the case of supplier dominance, it is essential to first analyse the supplier constellation, and then make the decision for the innovation path to follow — and not the other way around. Third, in the fight for getting access to a supplier’s innovation, a speed-up process with the buying company may be a tool for outperforming other buyers competing for the same supplier.

Matching Co-innovation Project Types to Diverse Customer Relationships: Perspective of an Industrial Technology Supplier

“…We also bring out the other possible parties involved in different supplier-customer co-innovation projects, such as research organizations, and their type of involvement in diverse types of co-innovation projects. The findings also show how the degree of supplier's dominance in a project is dependent on the co-innovation project type, not so much on the supplier's position in the customer relationship involved (Cox 2001) or on the supplier's technological position in the market (Goldberg and Schiele, 2020).…”

“…Contractual governance is based on formal contracts, unilateral investments, and short-term gains whereas relational governance implies long-term agreements based on personal relationships and social norms, such as trust and mutual commitment. Goldberg and Schiele (2020) study buyers' innovation process with technologically dominant suppliers and emphasize the need of carefully designing the buyer-supplier constellation in co-innovation and that in such a situation, the traditional innovation process may not work properly. As dominance plays an important role in co-innovation relationships, it is acknowledged in this study, too.…”

Purchasing skills leading to success: how to succeed in innovation sourcing

“…Moreover, the finding of the importance of Management Competences for innovation purchasers goes along with a recent observation derived from innovation research that gaining access to suppliers' innovations has a substantial strategic component. Buying firms benefit from being more attractive to suppliers than competing buyers to gain collaboration commitment and, by this means, to achieve competitive advantage (Goldberg & Schiele, 2020;Schiele, 2012).…”

Why and How to Involve Purchasing in New Product Development?

“…On the bottom line, supplier involvement can contribute to the sustainable competitiveness of firms (Jaakkola and Hakanen, 2013). However, supplier participation in NPD is not self-evident, but often may require active efforts by the buyer (Goldberg and Schiele, 2019;Makkonen et al, 2018;Pihlajamaa et al, 2019). The question is, then, how can supplier participation in NPD be enabled?…”