Supply-chain innovation

Abstract

Supply chain affects the role that innovation plays within and across firm boundaries. Within the firm boundaries, supply chain narrows down the innovation scope and improves a firm’s technology efficiency and productivity. Across the firm boundaries, supply chain provides additional sources of innovation, affects innovation acquisition, and influences innovation investment. This thesis aims to contribute to the research stream of supply-chain innovation, which generalizes any forms of knowledge flows that are derived from supply-chain environment/partnership and could be assimilated and transformed into firm-level innovation. The author explores the impacts of supply-chain innovation on technology invention and technology investment and investigates the moral concern on supply-chain innovation. The thesis consists of three studies. The first essay studies the impact of supply-chain technology spillover on a supplier’s new product invention. Fixed-effects panel analyses reveal that, as an external source of innovation, supply-chain spillovers improve a supplier’s new product introduction even with its R&D expenses controlled. An instrumental variable approach and a CEM approach jointly confirm the causality. Therefore, firms should not only rely on its internal effort to innovate; instead, supply-chain could be effective source of innovation as well. Second, the duration of the supply-chain relationship strengthens the positive spillover effect because of supplier’s accumulated learning effect, whereas a supplier’s sales dependence on its major buyers weakens it, due to overly narrowed technology scope. Although suppliers are encouraged to cultivate a long-term supply-chain relationship, they should be cautious not to overly depend on their major buyers. A series of robustness checks confirm this finding. The second study investigates the impact of supply-chain innovation on new technology investment. The author considers a High-Tech Manufacturer (HTM) that sources a key component from a new but financially constrained supplier who offers an innovative but immature technology, or from an existing supplier should the new technology fail. The HTM invests in the form of Equity or Loan. An analytical model discusses the investment type given different profiles of the new supplier and shows that when the marginal development cost and the new supplier’s initial capital level are low, an Equity-contract induces higher success rate and generates a higher expected payoff for the HTM than a Loan-contract; otherwise, a Loan-contract is preferred. More importantly, the optimal investment strategy may change, depending on whether a backup supplier is available. The third study investigates the effect of negative media attention regarding a buyer's corporate social responsibility (CSR) issues when the supplier acquires innovation from the buyer. The author argues that the public criticism towards a buyer’s CSR issues brings reputational risks and such risks diffuse through the supply chain. A fixed-effect panel regression reveals a negative relationship between the negative media reports regarding the buyer’s supply-chain CSR violation and the citations her supplier makes to this buyer. This relationship is robust to value-chain settings, different degrees of severity and coverage of the media attention, high-tech and non-high-tech industries, and varies model settings.