Learning by supplying and competition threat

Abstract

This study proposes a model of learning by supplying in an international outsourcing framework, where the supplier of a relationship-specific input can reverse engineer and become a competitor to its partner in the final goods market. Transmitting knowledge to a more capable supplier therefore creates competitive threat despite the benefits it brings within an outsourcing relationship. In particular, in markets with less differentiated products and for standard inputs that require less knowledge to be shared, choosing an intermediate capability level supplier prompts a strategic expansion of output to deter supplier entry in the final goods market, resulting in higher profits and welfare. A highly capable supplier is instead accommodated as a rival and is a source of royalty income when the relationshipspecific input embeds more knowledge about the final product and when the competing varieties are differentiated.

Export learning advantages through supplying multinational enterprises in emerging markets: a conceptual model

“…For instance, in these sourcing arrangements, it is widely anticipated that MNEs can share information and give support that can enhance the capability development and international competitiveness of their EMF counterparts (Kotabe, 1998;Kotabe and Murray, 2018;Sako, 2004). But beyond the international experience of established and large EMF brands such as Acer, Lenovo and Samsung, among others (Chen et al, 2020;Kothari et al, 2013), we still know little about the facilitating role that close and durable sourcing relationships with MNEs play in the internationalisation process of the less established and fledging EMFs that are new to international business.…”

“…For example, the interest of MNEs within these evolving sourcing relationships has shifted away from merely securing low production cost advantages towards exploiting innovative capabilities of suppliers (Inemek and Matthyssens, 2013;Kotabe et al, 2008). Equally, it is widely observed that MNEs are weary of losing their competitive advantages as they engage in buyer-supplier ties with firms especially in EMs (Alcacer and Oxley, 2014;Chen et al, 2020;Hamel, 1991). In line with these observations, this paper draws on the theoretical predictions of RBV, absorptive capacity and relational embeddedness to advance a cohesive framework that examines the different firm level and relational factors that shape export advantages for EMFs that are new to international business in the unique setting of close knit sourcing relationships with MNEs.…”