Buyer participation in outsourced new product development projects: The role of relationship multiplexity

• Author: Stefan Wuyts,Inge Geyskens,Johanna H. Slot
• Date: 01 July 2020
• DOI: http://doi.org/10.1002/joom.1085
• Published date: 01 July 2020

RESEARCH ARTICLE

Buyer participation in outsourced new product

development projects: The role of relationship multiplexity

Johanna H. Slot

1

| Stefan Wuyts

1

| Inge Geyskens

2

1

Marketing Department, Smeal College of

Business, Penn State University,

University Park, Pennsylvania

2

Marketing Department, Tilburg

University, Tilburg, The Netherlands

Correspondence

Johanna H. Slot, Marketing Department,

Smeal College of Business, Penn State

University, 476 Business Building,

University Park, PA 16802.

Email: johannaslot@psu.edu

Funding information

Institute for the Study of Business

Markets; Nederlandse Organisatie voor

Wetenschappelijk Onderzoek

Handling Editor: Gregory Heim

Abstract

In business markets, firms increasingly participate in new product development

(NPD) activities that they outsource to suppliers. Such buyer participation can

be complicated by relationship multiplexity—that is, the buyer may simulta-

neously be a competitor, supplier, and/or partner of the supplier firm. Drawing

on role theory, we theorize how relationship multiplexity moderates the effect of

buyer participation on project success. We analyze 140 NPD projects that were

executed by a contract R&Dorganization in the aerospace industry and find that

buyer participation lowers the buyer's and the supplier's perceptions of project

success for buyer-as-supplier multiplexity. Buyer participation increases the per-

ceptions of project success in the case of buyer-as-partner multiplexity, but only

when these partnerships are emergent, as opposed to engineered. Buyer partici-

pation decreases the buyer's perception of project success for relationships fea-

turing buyer-as-competitor multiplexity but does not affect the supplier's

perception in the case of buyer-as-competitor multiplexity. Our results provide

tactical insights as to whenbuyer participation helps or hurts.

KEYWORDS

buyer participation, buyer–supplier relationships, new product development, relationship

multiplexity, role theory

1|INTRODUCTION

In various business markets, such as aerospace, automo-

tive, chemicals, and software, firms increasingly outsource

new product development (NPD) activities to external sup-

pliers (Handley & Benton, 2013). TheseNPD projects often

involve “one-off”customized products, and buyer firms

participate in varying degrees during the NPD process

(Sanderson & Cox, 2008). For example, Airbus outsourced

the development of engines for its A350-1000 model to

Rolls-Royce, while participating in Rolls-Royce's funda-

mental research program to develop new materials for the

engine (EPSRC, 2014). Similarly, Volvo outsourced the

development of its electric motor to Siemens, but rather

than being a passive buyer, Volvo participated in the elec-

tric motor's inverterdesign (Reed & Simon, 2011).

Buyer participation is defined as the level of involve-

ment of industrial customers in manufacturers' NPD pro-

cesses (Fang, 2008). A complicating feature of buyer

participation is that a buyer may take on more than one

role in relation to the supplier, making the buyer–

supplier relationship “multiplex.”Relationship multi-

plexity occurs when two firms are interconnected by

multiple kinds of ties that represent different roles

(Shipilov & Li, 2012). This is pointedly illustrated by

Hamel and Prahalad (1994:40): “on any given day […]

Received: 4 May 2019 Revised: 9 January 2020 Accepted: 6 February 2020

DOI: 10.1002/joom.1085

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided

the original work is properly cited.

© 2020 The Authors. Journal of Operations Management published by Wiley Periodicals, Inc. on behalf of The Association for Supply Chain Management, Inc.

578 J Oper Manag. 2020;66:578–612.wileyonlinelibrary.com/journal/joom

AT&T might find Motorola to be a supplier, a buyer, a

competitor, and a partner.”

The goal of this research is to investigate to what extent

“relationship multiplexity”alters the effectiveness of buyer

participation in outsourced NPD. In the spirit of Hamel and

Prahalad (1994), we distinguish between three forms of rela-

tionship multiplexity. First, buyer-as-competitor multiplexity

occurs when a buyer that participates in the supplier's NPD

process also competes with the supplier for market share in

other product markets. Second, buyer-as-supplier multiplexity

arises when the participating buyer and the supplier also

face each other in a reversed role for activities other than

the outsourced NPD project. Third, buyer-as-partner multi-

plexity refers to the situation when a buyer that participates

in the supplier's NPD process simultaneously shares partner

ties with the supplier outside of the outsourced NPD project.

We distinguish between two subtypes of partner ties:

engineered partner ties and emergent partner ties (Doz,

Olk, & Ring, 2000).

We contribute to the literature in three ways. First, the

extant literature on buyer participation suggests that buyer

participation can both positively and negatively affect pro-

ject success. On the bright side, it may increase project

success by increasing the supplier's flexibility (Heide &

John, 1990), by providing the supplier with access to buyer

resources and additional development paths (Campbell &

Cooper, 1999), and via better alignment with buyer needs

(Fang, 2008). On the dark side, it may decrease project

success by complicating coordination (Von Hippel, 1990)

and creating inequity concerns (Nyaga, Whipple, & Lynch,

2010).

1

We contribute to the buyer-participation literature

by adjudicating between these positions and examining

when buyer participation helps or hurts.

Second, we examine how relationship multiplexity mod-

erates the effect of buyer participation on project success. A

large number of operations management and supply chain

scholars study interdependencies and interactions between

ties in the context of supply chain triads and networks

(e.g., Choi & Wu, 2009; Dubois & Fredriksson, 2008;

Pathak, Wu, & Johnston, 2014; Wilhelm, 2011). We take a

different perspective and focus on interdependencies and

interactions between ties within the dyadic buyer–supplier

relationship. As Shipilov, Gulati, Kilduff, Li, and Tsai

(2014:457) observe, multiplexity is “prevalent in the world

around us, but very few studies have examined the linkages

between economic actors' identities and the heterogeneity

of their relationships.”Thus, we address calls for more

research on multiplexity (e.g., Shipilov, 2012; Shipilov et al.,

2014; Tuli, Bharadwaj, & Kohli, 2010).

Third, we distinguish between the buyer's and the sup-

plier's perceptions of project success. We thereby address a

blind spot of interorganizational research, which has tradi-

tionally ignored that different stakeholders may perceive

differences in outcome variables (Lumineau & Oliveira,

2018; Roh, Whipple, & Boyer, 2013). Recently, supply chain

and operations management researchers started to explore

asymmetries in perceptions (e.g., McEvily, Zaheer, &

Kamal, 2017; Villena & Craighead, 2017). Contributing to

this emerging research, we demonstrate that effects of

buyer participation and relationship multiplexity on project

success are indeed not always symmetric across the dyad.

Recognizing that “combining qualitative fieldwork

with archival or survey data collection is vitally important

for any scholar doing research within the strategic multi-

plexity perspective,”(Shipilov, 2012:220), we first held

three roundtable discussions with senior executives and

conducted 18 in-depth interviews with project managers

to ground our approach in managerial practice. To test our

hypotheses, we composed a unique, proprietary data set

on 140 outsourced NPD projects in the aerospace industry.

Our data set combines proprietary archival data—project

administration records, project evaluation reports (includ-

ing buyer and supplier evaluations at the time of project

closure), strategic cooperation plans, and procurement

records—with publicly available data. In addition, we

gathered survey data specifically for this study.

Our findings offer tactical recommendations to (buyer

and supplier) managers who decide on buyer participation

in outsourced NPD when buyer–supplier relationships are

multiplex. We find that buyer participation in outsourced

NPD may help or hurt, depending on the multiplexity of

the buyer–supplier relationship and whether the buyer or

supplier perspective is taken. Even though the supplier's

perception of project success is unaffected by involving a

competing buyer, the effect of buyer participation on the

competing buyer'sperception of project success is negative.

Also, we find that involving a buyer that also has a reverse

role as a supplier negatively affects both the buyer's and

the supplier's perceptions of project success. On balance, it

may be best to avoid buyer participation under buyer-as-

competitor or buyer-as-supplier multiplexity. Lastly, we add

a caveat to the industry sentiment that involving one's part-

ners in NPD is beneficial: we find that a positive impact only

holds for emergent but not for engineered partnerships. In

sum, we identify situations where buyer participation in out-

sourced NPD is harmful rather than helpful, in contrast to

business press that articulates only the positives of buyer

participation (e.g., Buchanan, 2008; Panasonic, 2014).

2|BACKGROUND

2.1 |Pilot study

To ground our approach in managerial practice, a quali-

tative phase preceded the development of the research

SLOT ET AL.579

hypotheses. The objective of this phase was to obtain

more insight into suppliers' perceptions of buyer partici-

pation in multiplex relationships, as suppliers are the key

decision-makers regarding the degree of buyer participa-

tion in their NPD processes (Smets, Langerak, & Rijsdijk,

2013). We held three roundtable discussions with senior

supplier executives in general management, marketing,

and R&D, and we conducted 18 in-depth interviews with

project managers who led NPD projects for their respec-

tive supplier firms. To capture a broad set of supplier per-

spectives, we selected interviewees from three firms in

different industries (aerospace, information technology

system development, and photolithography), with annual

revenues ranging from $85 million to $8.5 billion. On

average, the roundtables and in-depth interviews lasted

90 and 50 min, respectively.

The roundtables underscored that buyer participation

in outsourced NPD is a pervasive phenomenon and that

buyers are pushing suppliers for participation in their

outsourced NPD projects. Further, we learned that the

suppliers' executives were concerned about letting buyers

participate if these buyers also fulfilled other roles. A

recurring roundtable discussion theme was that suppliers

struggle with the challenges caused by multiplexity when

involving buyers in NPD.

The interviewees' opinions diverged concerning con-

sequences of participation by a competing buyer.Some

interviewees argued against involving a buyer with

which they compete in another product market. An

information technology system development firm's gen-

eral manager mentioned that “it seems wise to keep

competitors at a distance”and “we tend not to involve

competing buyers in their outsourced NPD projects;

why enlighten them more than is absolutely necessary?”

This belief contrasts with that of a photolithography

firm's R&D manager, who stated: “we don't mind

involving competitors, as they will get to learn the tech-

nologies and knowledge we develop sooner or later any-

way. However, competitors need to bring something to

the table as well; it's not a one-way street.”Concerning

participation by buyers that also play a supplier role for

activities other than the outsourced NPD project, an

aerospace development firm's marketing director

explained that “it signals our intent to strengthen and

deepen our relationship with this key stakeholder,”

while also pointing to a risk:

“A bad experience with the buyer in its sup-

plier role may negatively affect the way we

deal with it in its participating-buyer role

[…], a situation we should try to avoid

because termination of the buyer relation-

ship would imply a lose-lose situation.”

Several interviewees indicated they were inclined to

involve buyers with which they closely collaborate as

partners outside the focal NPD project. The aerospace

development firm's marketing director argued that they

let such buyers participate in NPD as “they are frequently

on the premises anyway,”but added he was unsure

whether this was the right strategy.

In sum, the roundtable discussions and in-depth

interviews underscore that (a) relationship multiplexity is

a pervasive phenomenon in the context of buyer partici-

pation in outsourced NPD, and (b) suppliers are either

unsure or do not converge on whether they should let

buyers participate if buyers also fulfill other roles. The

aerospace development firm's marketing director suc-

cinctly summarized this knowledge gap:

“I am not sure whether we should allow

buyer X to participate in the NPD process, as

we also compete against each other. […]

Should we let buyer Y participate in the

development process, as it is also our partner

in a consortium? I don't know. […] I believe

the other roles played by our buyers in rela-

tion to our firm may matter and should be

taken into account when we decide on buyer

participation.”

Appendix A1 provides an overview of the main

takeaways from the roundtables and interviews. Next, we

review the literature on role theory, which forms the

basis of our research hypotheses.

2.2 |Role theory

The theoretical root of our study resides in role theory,

which is the study of characteristic behavioral patterns

(“roles”) of actors within contexts (Biddle, 1986; Katz &

Kahn, 1966). Roles are evoked by the situation in which

actors find themselves. Based on these roles, actors form

expectations about the behaviors that are appropriate in

a specific situation (Grayson, 2007). Table 1 summarizes

role research relevant to buyer–supplier relationships.

Three issues are noteworthy.

First, extant research has almost exclusively applied

role theory at the individual level (e.g., the salesperson

level). Two notable exceptions are Heide and Wathne

(2006) and Dong, Ju, and Fang (2016), who elevate role

theory to the organizational level. Heide and Wathne

(2006:91) define an organizational role as “an organiza-

tional identity”or a “collective mind,”which “provides

the foundation for shared perceptions and coordinated

decision making.”In a similar vein, we adopt an

580 SLOT ET AL.