Innovation in supply networks—A research framework and roadmap

• Published date: 01 October 2020
• Author: Fabrizio Salvador,Sriram Narayanan,Subodha Kumar
• DOI: http://doi.org/10.1002/joom.1122
• Date: 01 October 2020

EDITORIAL

Innovation in supply networks—A research framework and

roadmap

Innovation in the products and services offered by a firm

does not originate exclusively from activities executed

within the boundaries of the firm. Firms are embedded

within networks of customers and suppliers (i.e., supply

networks) with which they exchange products, services,

data, and information. All these exchanges are potential

vectors of innovation. Supply network actors do not just

supplement internal innovation efforts. In fact, the stock

of knowledge that a firm can indirectly access through its

network is often comparable to or even exceeds internally

available resources, because any single firm usually has

many suppliers. To illustrate this fact with respect to a

firm's suppliers, for example, consider the research and

development (R&D) statistics from some of largest pub-

licly traded firms in the US, Japan, and Europe in the

Defense, Automotive, Electronics, Consumer and Pack-

aged Goods (CPG), and Industrial Equipment industries

(see Table 1, Data source: Factset and Compustat).

As seen in Table 1, in the period spanning fiscal years

2015–2018, the average research and development (R&D)

intensity (and cumulative average dollars invested in R&D)

of first-tier suppliers is higher than, or at least comparable

with, the R&D expenditure of the focal firm, both within

and across industries. For example, within Defense sector

firms, the ratio of average R&Dintensity(cumulativeR&D

dollars) of first-tier suppliers to that of the focal firm varies

from 0.98 to 19.63 (6.90 to 43.00); within the Automotive

sector, it varies from 0.60 to 1.40 (3.60 to 18.44). Similar pat-

terns are also observed in the Electronics, Industrial equip-

ment, and CPG sectors. Hewlett Packard, for example, has

an average first-tier supplier R&D intensity of 3.27 times its

own, and the cumulative R&D of its first-tier suppliers is

54.60 times its own spending. Similarly, General Electric

(GE) had first-tier suppliers with an R&D intensity about

62 times its own, while the first-tier suppliers collectively

spent 7.30 times the total R&D dollars that GE spent. These

examples illustrate that (1) suppliers R&D investment tend

to be greater or equal than the investment of their cus-

tomers, at least for very large publicly traded companies and

that (2) the potential to leverage supplier R&D investments

varies greatly within a given industry and across industries.

Leading corporations in different industries actively

acknowledge and promote supplier-driven innovation. In

the CPG industry, for instance, Unilever noted: “Around

70% of our innovations are linked to working with our stra-

tegic suppliers.”To this end, through its “partners to win”

program launched in 2011, Unilever invested in mutually

beneficial relationships with key suppliers to “share capa-

bilities and co-innovate”(Trebilcock, 2014). Similarly, as

Procter & Gamble (P&G) engaged in innovation activities

with its top 15 suppliers—who feature a combined R&D

staff of 50,000—the firm saw a 30% increase in the number

of innovation projects with joint staffing between P&G and

supplier researchers (Larry & Sakkab, 2006). In the case of

Toyota's R&D centers for individual platforms, collabora-

tion with suppliers for innovation is institutionalized.

Selected suppliers embedded personnel in the R&D center's

operations (Wyman, 2015). Technology firms that invest

vast resources in innovation have also embraced this prac-

tice. For example, Cisco (Gassmann, 2006) and Google

(Remneland-Wikhamn, Ljungberg, Bergquist, & Kuschel,

2011) have heavily leveraged supplier partnerships to

enhance the pace of their innovations. Overall, these exam-

ples emphasize the importance of the supplier network in

the current context. Rao (2018) state that as much as

55–65% of innovation is driven by suppliers.

This special issue offers a unique opportunity to take

stock of the multiple streams of research that investigate

innovation in supply networks and to sketch out new

avenues for research. In this introductory article, we first

discuss the impetus for investigating innovations in sup-

ply networks and offer a brief overview of past research

that relates to this topic. Next, we develop a framework

that, while integrating past research results, pinpoints

numerous opportunities for future research on innova-

tion in supply networks. While doing so, we discuss how

the papers that are a part of this special issue fit within

the proposed framework.

1|IMPETUS FOR

INVESTIGATING SUPPLY

NETWORKS

That supply networks play a role in innovation processes

and outcomes is not a novel idea. However, we expect

Received: 10 September 2020 Accepted: 11 September 2020

DOI: 10.1002/joom.1122

754 © 2020 Association for Supply Chain Management, Inc. J Oper Manag. 2020;66:754–767.wileyonlinelibrary.com/journal/joom