Supply base innovation and firm financial performance

Abstract

Firms are increasingly sourcing innovation from their supply chain partners. Meanwhile, supply chains have evolved into complex networks, which complicates the role that supply chain partners play in innovation and financial performance of firms. Previous research has mainly focused on the direct effect of innovation on a firm's financial performance, overlooking the innovativeness and complexity of supply networks. In this research, we focus on a firm's supply base, defined as the first tier of a supply network, and investigate the relationship between the intensity of R&D within the supply base and the financial performance of the focal firm. We also examine the moderating role of three aspects of supply base complexity-Number of suppliers, differentiation, and interrelationships among suppliers. Utilizing secondary data from Bloomberg and Compustat, we find that the R&D intensity of a firm's supply base is positively associated with the firm's financial performance. Further, all three aspects of supply base complexity negatively moderate this relationship. These findings make important contributions to the literature by establishing a direct, positive relationship between supply base R&D and firm financial performance, which is attenuated by complexities within the supply base.

Perceived supplier opportunism in outsourcing relationships in emerging economies

“…Our findings support the theorizing from Weber and Mayer (2014) that firm attributes, specifically the level of economic development where the firm operates and its competitive priorities, affect perceived opportunism. These findings also add to the literature that illustrates the difficulties in managing exchange relationships across institutional environments (e.g., Dong, Skowronski, Song, Venkataraman, & Zou, 2020;Handley & Angst, 2015;Oxley, 1999;Skowronski & Benton, 2018). While that literature has often examined the difficulty that a firm from an advanced economy might face with suppliers in an emerging economy, we focus on the difficulties that a supplier operating in an emerging economy may encounter when managing a relationship with a buyer from an advanced economy.…”

Embracing supply base complexity: the contingency role of strategic purchasing

“…We deliberately refrain from approaching the performance construct from a broader perspective, given the marginal effects and equivocal results reported in the literature (e.g. Dong et al , 2020; Lu and Shang, 2017). From an operational stance, purchasing performance concerns the cost, quality, delivery and flexibility performance of the suppliers (González-Benito et al , 2016; Nair et al , 2015).…”

Structural characteristics of complex supply chain networks

“…Empirically supported network research to date has also helped establish an excellent jumping‐off point for this research (Basole & Bellamy, 2014; Brintrup et al 2016; Choi & Hong, 2002; Kim et al 2015), although data considering both the supplier and customer sides of the supply chain are scarce. Recent works have expanded the amount of data examined (Bellamy et al 2020; Brintrup et al 2016; Dong et al 2020; Lu & Shang, 2017; Sharma et al 2019). However, empirical studies that incorporate both supply networks, customer networks, and partner networks, including exchange relationships within and across various tiers, are absent.…”

“…Kim et al (2011) and Potter and Wilhelm (2020) analyzed these networks using social network metrics such as network size and centrality measures to identify dominant suppliers. Recent studies have explored two‐tier, upstream supply networks with and inter‐supplier relationships (e.g., Dong et al 2020; Lu & Shang, 2017).…”

“…Past studies typically have limited the empirical investigation of network structures to a single firm, commonly in the automotive sector (Brintrup et al 2016; Kim et al 2011) or to a narrow part of an SCN, such as the upstream supply network (Dong et al 2020; Potter & Wilhelm, 2020; Sharma et al 2019). SCN research has not provided evidence of whether certain network topologies are unique to a single firm or common within and across industries.…”