The Value of Supply Network for Product Innovation

Firms have increasingly integrated suppliers and customers in their innovation processes. Access to external knowledge and resources is widely believed to improve innovation performance. Yet, involvement of supply network partners during product development does not always prove to be beneficial. This study identifies contextual factors that influence the value of the information and resources obtained from the supply network when the primary goal is the level of product innovativeness. The contextual factors discussed in this paper include the extent of formal internal coordination within the focal development firm, and two external factors, competitive intensity and technological turbulence in the product market. The data comes from a survey of manufacturing firms in business-to-business (B2B) settings. The results indicate that technological turbulence strengthens the effect of supplier and customer involvement on product innovation. However, under high competitive intensity, only supplier involvement is associated with product innovation. Under both high competitive intensity and high internal coordination, customer information gathering is positively associated with product innovation, but customer involvement is not. We present the managerial implications of these findings and recommendations on how to adapt the firm's innovation strategy.