How does technological diversity in supplier network drive buyer innovation? Relational process and contingencies

• DOI: http://doi.org/10.1016/j.jom.2014.06.001
• Author: En Xie,Kevin Zheng Zhou,Gerald Yong Gao
• Published date: 01 May 2015
• Date: 01 May 2015

Journal of Operations Management 36 (2015) 165–177

Contents lists available at ScienceDirect

Journal of Operations Management

journal homepage: www.elsevier.com/locate/jom

How does technological diversity in supplier network drive buyer

innovation? Relational process and contingencies

Gerald Yong Gaoa,EnXie

b,∗, Kevin Zheng Zhouc

aDepartment of Marketing, University of Missouri – St. Louis, MO, 63021, United States

bSchool of Management, Xi’an Jiaotong University, Xi’ an, Shaanxi, 7100049, China

cFaculty of Business and Economics, University of Hong Kong, Pokfulam, Hong Kong

article info

Article history:

Received 1 November 2013

Received in revised form 26 May 2014

Accepted 3 June 2014

Available online 10 June 2014

Accepted by Thomas Younghoon Choi

Keywords:

Supplier network

Technological diversity

Novel information sharing

Buyer–supplier relational strength

Supplier network density

New product creativity

abstract

External networks provide important knowledge sources of innovation for firms. Drawing on social net-

work theory, this study examines how technological diversity in supplier network influences a focal

buyer firm’s innovation. The results from a survey of 202 Chinese manufacturing firms and their supplier

networks reveal that novel information sharing partially mediates the effect of technological diversity in

supplier network on buyer firms’ new product creativity. The positive effect of technological diversity is

enhanced by buyer–supplier relational strength but inhibited by supplier network density; competitive

intensity positively moderates this effect, and technological turbulence negatively moderates it. These

findings provide novel insights into how buyer firms can use their supplier networks to enhance product

innovation.

© 2014 Elsevier B.V. All rights reserved.

1. Introduction

Developing radically new products is vital for firms to cre-

ate and sustain competitive advantage in the marketplace, a

critical challenge in doing so is how to gain novel insights

and creative ideas (Frohlich and Westbrook, 2001; Zhou and

Li, 2012). Because rapid technological advances and volatile

customer demand require knowledge and expertise beyond a

firm’s boundary, external networks such as supplier networks

have become increasingly important wellsprings of new product

development (NPD) (Phelps, 2010; Zaheer and Bell, 2005). Man-

ufacturers often proactively involve upstream suppliers in NPD

processes—for example, through the guest engineer mechanism,

in which automakers involve technical personnel of suppliers and

incorporate their knowledge into product design and innovation

(Choi and Hong, 2002; Dyer, 1997). Moreover, consumer product

manufacturers such as Procter & Gamble have obtained a signifi-

cant proportion of new product ideas externally rather than relying

on their own internal capabilities (Fawcett et al., 2012).

The supply chain management literature has long acknowl-

edged the benefit of engaging suppliers in the NPD process.

∗Corresponding author. Tel.: +86 29 82668536.

E-mail addresses: gaogy@umsl.edu (G.Y. Gao), xieen@mail.xjtu.edu.cn (E. Xie),

kevinzhou@business.hku.hk (K.Z. Zhou).

Previous research supports the value of such practices, including

supplier selection (Choi and Hartley, 1996), early supplier involve-

ment (Petersen et al., 2005), supply base management (Choi and

Krause, 2006), and supplier integration (Wong et al., 2011), in

fostering buyer performance. More recent developments further

stress the importance of developing social capital between buy-

ers and suppliers and show that embeddedness with suppliers

promotes cooperation and enables buyer firms to better leverage

supplier resources for their product innovation (Carey et al., 2011;

Koufteros et al., 2007; Lawson et al., 2008; Villena et al., 2011).

Although existing studies provide rich insights into how suppliers

can contribute to a buyer firm’s competitive advantage, most focus

on the dyadic relationship between the buyer and its key supplier

(Villena et al., 2011; Zhou et al., 2014) and limited attention has

been paid to the broader supply chain network, which consists of

multiple suppliers.

Social network theory suggests that a complete understanding

of the impact of social networks requires a joint examination of

network content such as technological diversity, network structure

that reflects both buyer–supplier and supplier–supplier relation-

ships, and the surrounding conditions of market environments

(Gulati, 1995; Gulati et al., 2000; Phelps, 2010). Technological diver-

sity in supplier network refers to the extent to which technologies

owned by a buyer firm’s suppliers differ from one another and from

those of the focal buyer firm (Phelps, 2010; Rodan and Galunic,

2004). It provides rich access to novel knowledge elements and

http://dx.doi.org/10.1016/j.jom.2014.06.001

0272-6963/© 2014 Elsevier B.V. All rights reserved.