Reconfiguring supplier relationships between local and global: History matters

Small and medium-sized companies are increasingly facing international markets as part of their processes of growth and development. A great deal of literature deals with different patterns of growth and international development that are specific to SMEs with respect to large companies. Fewer studies have been conducted on the reconfiguration of company supplier relationships involved in these processes. This paper focuses on the role played by the consolidated set of company supplier relationships when the firm faces some critical stages in its process of development, i.e., growth from small to mid-sized and the implementation of new ventures abroad accessing new business relationships with international suppliers. A multiple and longitudinal case study shows how the local set of supplier relationships of four mid-sized Italian mechanical companies acting in industrial districts has played an important role in shaping the emerging set of supplier relationships and addressing companies' actions in their growth and internationalization processes.     

Is local sourcing out of fashion in the globalization era? Evidence from Italian mechanical industry

The paper concerns a study on the changes affecting leading cluster companies' supplier relationships. In particular, the paper aims at investigating under which conditions and how industrial cluster companies rely on local suppliers in the current context of international competitive pressure and easier access to international supply sources. The research methodology is qualitative and based on a long-term longitudinal research of three case studies of Italian industrial cluster companies that are leading firms in specific niches of the mechanical industry. Two main questions are debated: under which conditions have industrial cluster companies relied on local suppliers? What has been the evolution of relationships between industrial cluster companies and their local suppliers? The empirical analysis shows that local suppliers have been playing strategic roles in different ways in distinct historical phases, contributing actively in terms of knowledge and competence development, production flexibility, delivery performance and cost efficiency.     

“I want you back”: On the strategic roles of boundary spanners in supplier switching-back processes

This paper builds upon literature addressing boundary spanners and switching suppliers in order to explore an under-examined aspect of buyer–supplier relationships: how different individuals at multiple organisational levels affect processes by which firms return, or “switch back”, to former suppliers after breaches in their relationships. Our study followed a qualitative approach by applying an abductive research methodology to make sense of 85 semi-structured interviews with executives involved in the erstwhile buyer–supplier relationships that we investigated. We found that supplier switching-back processes (SSBPs) can be understood as constituted by a set of alignments and misalignments between boundary spanners (i.e. top management, purchasing and sales agents, engineers and technicians) in the organisations involved. Thus, peoples' interactions, or lack thereof, directly affect the possibility for buyers and suppliers to restore their severed relationships. We conclude that boundary spanners pursue seven distinct roles during different periods in SSBPs, roles that relate to three identified functions of boundary spanners in such processes. The paper closes by highlighting what our findings imply for business managers, limitations and some possible directions for future research.     

The role of contextual factors in relationship commitment of buyers to foreign suppliers: A survey of Korean importers

Businesses engaged in the importing of different products and services encounter suppliers with wide ranging backgrounds in terms of their size, cultural experiences, and duration of relationship. In this study, we investigate the effects of such contextual variables on the importers' relationship commitment to their foreign supplier. The hypotheses are tested using data collected from 144 Korean importers. Results indicate that both cultural similarity and type of product (consumer vs. industrial) do not impact the Korean importers' relationship commitment. However, their interaction is significant; cultural similarity matters for consumer products but not for industrial products. It is found that Korean importers tend to be more committed to larger suppliers and to those exporters with whom they have been having longer relationships. Implications for managers, limitations and suggestions for future research are provided.     

Transaction cost economics in global sourcing: Assessing regional differences and implications for performance

This paper addresses two gaps in current research on transaction cost economics (TCE): first, the fundamental claim suggesting that firms that align their governance structure to transactions according to TCE perform better than those that do not, and second, the application of TCE to global sourcing transactions. A research model is presented and evaluated using a set of 150 relationships between Swiss buyers and foreign suppliers. The findings suggest that there are significant differences in how transactions and governance structures are aligned with varying performance and with suppliers from Western Europe as compared to suppliers from other regions.     

The impact of supplier development on buyer competitive advantage: A path analytic model

As manufacturing firms increasingly realize that supplier performance is crucial to their establishing and maintaining competitive advantage, supplier development has been a subject of considerable research in supply chain management. We develop and test a path model to explore how supplier development practices affect buyer-supplier performance from the buying firm's perspective in the context of Hong Kong's electronics industry. The results show that top management, supplier evaluation, and supplier strategic objectives are significant determinants of transaction-specific supplier development, and that buyers that have closer collaborative relationships with suppliers may strengthen their competitive advantage.     

Buyer Market Power and Innovative Activities

This empirical paper deals with the effects of supplier and buyer market concentration on the innovative behavior of suppliers within the German automobile industry. The data set contains firms from all size classes and covers measures of innovation input as well as innovation output. It can be shown that (a) firms' innovation and R & D-employment intensity will decline (increase) in buyer concentrations if supplier markets are low (high) concentrated; (b) buyers' pressure on input prices reduces suppliers' innovation expenditures and their incentive to develop new products; (c) a small number of competitors in suppliers markets and a large stock of customers stimulates innovative behavior; (d) small and medium sized suppliers invest more in their innovative activities but have less probability of realizing innovations than larger firms; and (e) higher technological capabilities lead to higher innovation input and output.     

Value for value—The dynamics of supplier value in collaborative new product development

Suppliers are recognized as an important source of innovation. Research into supplier involvement in new product development has shown that benefits can potentially be reaped by customers. However, a relatively unexplored precondition is the willingness of suppliers to invest in their customers’ innovative efforts. In this exploratory, theory-extending research, we investigate the value that a supplier can experience from being involved in high tech firms’ new product development. We find that value comes in three forms for suppliers: (1) financial payment for sales volumes and product development services, (2) technological knowledge and product designs, and the (3) reputation of doing business with leading-edge firms Additionally, we place this in a dynamic, long-term perspective, and find indications for a positive or negative feedback effect, depending on the emphasis the buyer puts on collaborative innovation with the supplier and the extent to which suppliers can use competences, knowledge and reputation resulting from the collaboration in subsequent business development activities. The positive effect results in added value for both parties in the dyad, and the negative effect leads to the opposite.     

Risky Business or Competitive Power? Supplier Involvement in Japanese Product Design

Notwithstanding the alleged risks of outsourcing design work, leading manufacturers in the Japanese automotive industry collaborate closely with their key suppliers. Despite widespread recognition of the effectiveness of these close-knit supplier networks, however, little research exists on the factors that affect the purchase of design work from suppliers. S. Nazli Wasti and Jeffrey K. Liker fill this gap by exploring the factors that affect Japanese automotive firms' purchase of design work from their component suppliers. Using data from a survey of 122 Japanese automotive component suppliers, their study addresses two key questions. First, what factors lead Japanese buyers to involve some suppliers heavily in design while giving others relatively little control over design decisions? And second, does the Japanese practice of involving suppliers in design offer performance benefits? The study focuses on first-tier suppliers of parts, assemblies, and complete subsystems (e.g., audio, fuel and emissions, heating and air conditioning). The study does not include suppliers of raw materials and chemicals, assembly and processing equipment, indirect materials, tooling and dies, computers and software, or engineering and business consulting services. The study breaks down the broad concept of supplier involvement in design work into three measurable elements: the extent to which the supplier influences decision-making during the early stages of product development; the amount of control the buyer retains over the design; and the frequency of design-related communication between the buyer and the supplier. Factors that have a positive effect on the level of supplier involvement among the companies studied include technological uncertainty of the component and the supplier's in-house technical capabilities. For companies in the study, the level of competition in the supplier market has a negative effect on the degree of supplier involvement in design. The responses indicate that supplier involvement offers performance benefits for both the supplier and the buyer. For the supplier firms studied, increased involvement in the design process permits greater focus on design for manufacturability (DFM). And of course, supplier-generated design improvements clearly benefit the buyers, allowing these firms to capitalize on the experience and the insight that their suppliers have regarding the parts that they supply.     

Strategic Suppliers' Technical Contributions to New Product Advantage: Substitution and Configuration Options

Current theory lacks clarity on how different kinds of resources contribute to new product advantage, or how firms can combine different resources to achieve a new product advantage. While several studies have identified different firm‐specific resources that influence new product advantage, comparatively little research has explored the contribution of strategic supplier resources. Combining resource‐based and relational perspectives, this study develops a theoretical model investigating how a strategic supplier's technical capabilities impact focal firm new product advantage and how firms combine different resources to gain this advantage. The model is tested using detailed survey data collected from 153 interorganizational new product development projects in the United Kingdom within which a strategic supplier had been extensively involved. Empirical results support our research hypotheses. First, supplier technical performance is shown to have a significant positive impact on new product advantage. Next, we show that while supplier technical capabilities have a positive influence on supplier technical performance, the a priori nature of the supplier's task moderates the relationship. Finally, our data support our hypotheses related to the positive relationship between relationship‐specific absorptive capacity and new product advantage, and the proposed negative moderation of supplier technical capabilities on this relationship. Based upon these findings, we encourage managers to recognize that strategic suppliers' with greater technical capabilities perform better regardless of the degree of creativity required by their task; but that strategic suppliers with lower technical capabilities may partially compensate (substitute) for their lack of technical capabilities, if they are able to respond to high problem‐solving task requirements. Furthermore, we suggest that the firm's development of relationship‐specific absorptive capacity is much more important when a strategic supplier is less technically capable. A buying firm's relationship‐specific absorptive capacity can, according to our data, substitute for low supplier technical capabilities. On the other hand, where the supplier has strong technical capabilities, investments in relationship‐specific absorptive capacity have no effect on new product advantage. Our findings reinforce recent calls for research on how firms can combine different resources and capabilities to achieve superior performance.     

Effects of Supplier and Customer Integration on Product Innovation and Performance: Empirical Evidence in Hong Kong Manufacturers

While the beneficial impacts of supplier and customer integration are generally acknowledged, very few empirical research studies have examined how an organization can achieve better product performance through product innovation enhanced by such integration. This paper thus examines the impact of key supplier and customer integration processes (i.e., information sharing and product codevelopment with supplier and customer, respectively) on product innovation as well as their impact on product performance. It contributes to existing literature by asking how such integration activities affect product innovation and performance in both direct and indirect ways. After surveying 251 manufacturers in Hong Kong, this study tested the relationships among information sharing, product codevelopment, product innovativeness, and performance with three control variables (i.e., company size, type of industry, and market certainty). Structural equation modeling with correlation and t‐tests was used to test the hypothesized research model. The findings indicate a direct, positive relationship between supplier and customer integration and product performance. In particular, this study verifies that sharing information with suppliers and product codevelopment with customers directly improves product performance. In addition, this study empirically examines the indirect effects of supplier and customer integration processes on product performance, mediated by innovation. This has seldom been attempted in previous research. The empirical findings show that product codevelopment with suppliers improves performance, mediated by innovation. However, the sampled firms cannot improve their product innovation by sharing information with their current customers and suppliers as well as codeveloping new products with the customers. If the adoption of supplier and customer integration is not cost free, the findings of this study may suggest firms work on particular supplier and customer integration processes (i.e., product codevelopment with suppliers) to improve their product innovation. The study also suggests that companies codevelop new products only with new customers and lead users instead of current ones for product innovation. For managers, this study has demonstrated that both information sharing and product codevelopment affect performance directly and indirectly. Managers should put more emphasis on these key processes, especially when linked with product innovation. Managers should consider involving their suppliers and customers in the early stages of design. Information sharing with suppliers is also important in product development. As suggested by this study, extensive effort on supplier and customer integration should be made to directly augment current product performance and product innovation at the same time.     

Demand‐side strategy,relational advantage,and partner‐driven corporate scope: The case for client‐led diversification

Research Summary: We advance research on corporate diversification by joining insights from the demand‐side and relational views in strategy to offer a novel theory of client‐led diversification. We propose that client‐led diversification results from a combination of the customer‐driven opportunities emphasized in the demand‐side view and the creation of added value through relational assets that is a central tenet of the relational view. Furthermore, we hypothesize that suppliers’ client‐specific knowledge, clients’ relational commitment to suppliers, and growth opportunities in clients’ markets (relative to the suppliers’ own markets) will magnify the client‐led diversification effect. We test our hypotheses using a longitudinal dataset on patent law firms and their diversification into new domains of patent prosecution work for their corporate clients. Managerial Summary: Explanations of why firms diversify into new lines of business have largely concerned the redeployment of underutilized resources, with little regard to opportunities or influences stemming from firms’ existing customers. In our article, we show how the changing scope of business needs from a knowledge‐based supplier firm's set of existing clients is a central driver of supplier‐firm diversification, and this is especially the case when the level of relational assets shared between a supplier and its clients is higher. In a competitive landscape where suppliers compete intensively for the business of clients, our results show how managers can increase the likelihood of capturing additional business from its existing exchange relationships rather than bearing the risks of seeking new exchange relationships.     

Early supplier integration: the dual role of purchasing in new product development

Interest in early supplier integration in new product development (NPD) has increased as an open innovation approach has become more common in firms. To support supplier integration, the purchasing function of a firm can assume a new ‘dual’ role: contributing to NPD while also managing overall costs. Previous research has offered few insights into how the purchasing function should best be organised so that it will fulfil this dual role. This paper reports on the results of a consortial benchmarking study in which an industry–academic consortium visited and analysed six best‐practice firms. The findings describe how innovative firms organise their purchasing function, distinguishing between ‘advanced sourcing’ and ‘life‐cycle sourcing’ units. The results include the tools that these firms use, such as regular innovation meetings with suppliers and technology roadmaps linking firm strategy, innovation strategy and sourcing strategies. The paper also recommends that researchers shift from a narrow focus on a single project to a broader consideration of supplier and organisational issues in NPD.     

Channel relationship and business uncertainty: Evidence from the Hong Kong market

This study examines the dynamics of channel relationships between an end user and multiple suppliers in Hong Kong, a major international logistics hub in Asia. Drawing on the literature on channel relationships, we examine the links between different channel relationship variables and the contingent effect of business uncertainty on the links between these variables and supplier commitment. The results of the study indicate that expected relationship continuity mediates the effects of trust and relationship quality on commitment. Furthermore, the positive effect of trust on commitment is found to be stronger when business uncertainty is high than when business uncertainty is low. As supply chain management is becoming essential for firms to succeed in today's business, industrial marketing managers need to be aware of the dynamics in channel relationships and to better manage their supply chains. The implications of our findings for research and for the practice of channel relationship management are provided.     

Driving service innovativeness via collaboration with customers and suppliers: Evidence from business-to-business services

Service innovativeness represents a key source of competitive advantage and a research priority. However, empirical evidence about how service firms successfully offer novel and meaningful services is scarce, particularly in the context of business-to-business (B2B) service firms. Drawing on the B2B collaborative perspective and KBV, we aim to investigate when customer and supplier collaboration are more beneficial to drive service novelty and meaningfulness. Using data of 186 B2B service firms, the results reveal that collaboration with customers and suppliers are not equally beneficial to drive both novelty and meaningfulness and their outcomes can be amplified or lost under specific conditions. Customer collaboration is more beneficial to increase novelty in the presence of exploratory learning and employee collaboration. Contrary, supplier collaboration drives novelty only at higher levels of exploratory learning. Further, supplier collaboration is more beneficial to improve meaningfulness at higher levels of employee collaboration. Finally, the positive outcomes of both customer and supplier collaboration disappear in the presence of knowledge tacitness. Our findings provide new insights about drivers and contingencies that affect different aspects of service innovativeness.     

How much you know versus how well I know you: selecting a supplier for a technically innovative component

How do firms select a supplier for an innovative component? Three literatures speak to this question. Transaction cost economics focuses on the value of internalization, the literature on inter‐firm relationships on the value of past relationships, and the firm capabilities literature on the value of superior capabilities. Choosing a supplier means choosing a bundle of these characteristics—internal vs. external, amount of prior transactions, and capabilities—but no study has integrated all three characteristics, making it impossible to understand the trade‐offs involved either theoretically or managerially. I propose and test a model integrating all three factors, allowing us to understand the trade‐offs involved. I find that when uncertainty is low, the decision is made primarily on the basis of differences in technical capabilities. As uncertainty increases, prior relationships and a supplier being internal take on greater positive significance relative to the importance of technical capabilities. At extreme levels of uncertainty, the value of internal supply relationships becomes very high and past relationships lose their significance. While adherents of each literature have criticized the others for what they omit, this model moves beyond this mutual recrimination by incorporating the key concerns of each literature, setting the stage for future research that draws upon the strength of each. The model provides guidance for any situation where a firm must chose a partner under uncertainty. Lastly, it addresses the strategic question of how companies should organize in the long run to access the capabilities needed for competitive success. Copyright © 2004 John Wiley & Sons, Ltd.     

Industrial buying behavior in Brazil

Many firms in less developed countries (LDCs) make little use of available information when they are considering investing in new production technology. A very small number of alternative suppliers are generally considered and supplier evaluation is often perfunctory. A number of questions concerning the information on alternative suppliers are raised and answers were sought in a field study carried out in Brazil. The factors that influence the degree of search by managers for information on alternatives included the relative cost of the equipment, the familiarity of the buyer with the technology, the cost of acquiring the information, the available resources of the company, and the buyer's expectations concerning quality and price, Implications for industrial marketing in LDCs are discussed and suggestions are made concerning the assistance that LDC governments can provide to firms that import production technology from the industrialized countries.     

The Effects of Supplier Involvement and Knowledge Protection on Product Innovation in Customer–Supplier Relationships: A Study of Global Automotive Suppliers in China

Globalization drives firms to develop product innovation through their global supply chains. While innovations generated by supply channel members, as opposed to individual partners, are playing an increasingly important role in the success of all supply chain partners, there has been limited research on how supply chain relationships cultivate the process of such innovation generation, particularly in emerging markets. Correspondingly, this study explores how multinational suppliers can develop adaptive product innovation to create competitive advantage in emerging markets. Drawing on the knowledge‐based view and transaction cost economics, this study investigates the influence of supplier involvement and other factors on supplier innovation and performance. The results of a survey of 170 multinational automobile suppliers in China provide support for most of the hypotheses. Specifically, supplier involvement in codesign has an inverted U‐shaped relationship with product innovation. Furthermore, knowledge protection, trust, and technological uncertainty are all found to drive greater product innovation. In addition, the institutional environment moderates the effect of product innovation on performance. Overall, this study enhances our understanding of how MNEs can acquire local knowledge and develop adaptive products in emerging markets.     

Interfirm Relationships in the Supply Chain: The Small Supplier’s View

The need for global market presence, the complexity of new product development, and the emphasis on core competence are making alliances among firms more important, and recent evidence suggests that these issues are affecting small suppliers as well as the large firms that are their customers. This paper studied the relationship orientation (i.e., the perceived importance, of interfirm relations) in a fragmented supplier industry whose single largest customer group is automotive OEMs. The primary objective of the research was the identification of factors that discriminate between firms with high and low relationship orientations. The study found four factors describing benefits and barriers associated with interfirm relationships, and found that firms with a high relationship orientation were smaller and more optimistic about the industry’s ability to support a greater number of firms in the future, and perceived faster technology change than firms with a low relationship orientation.