Buyer-supplier structural equivalence and supplier innovation value: Evidence from the PACE Awards in the automotive industry
Sangho Chae, Tilburg University
With the growing demand for smarter, cleaner, and safer cars, which require novel parts, automotive original equipment manufacturers (OEMs) are increasingly sourcing innovations from new or foreign suppliers. For OEMs, working with new or foreign suppliers is challenging due to the remote relational and cognitive OEM-supplier distances. Adopting a social capital perspective, we examine how the structural dimension of social capital affects a supplier’s innovation value to an OEM. Specifically, we consider how OEM-supplier structural equivalence impacts a dyad-level innovation outcome, supplier innovation value, under different levels of relational (new versus existing supplier) and cognitive (foreign versus domestic supplier) capital. We built a unique dataset from three independent sources—the automobile industry’s Premier Automotive Suppliers' Contribution to Excellence (PACE) Awards, FactSet Supply Chain Relationships, and Compustat Fundamentals Annual—to test our hypotheses. The results of our tests confirm that a new or foreign supplier is less likely to create valuable innovations for an OEM. However, the OEM-supplier structural equivalence has a positive influence on the supplier innovation value to the OEM, an effect that is stronger for new or foreign suppliers, than for existing or domestic suppliers. This study contributes to the supply network and innovation literature by highlighting the importance of assessing both a supplier’s relative network position (OEM-supplier structural equivalence) and a supplier’s relational and cognitive capital when predicting supplier innovation value to an OEM.
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Cass Business School, 106 Bunhill Row
106 Bunhill Row, London EC1Y 8TZ, UK
Tilburg School of Economics and Management, Tilburg University
Sangho Chae is an assistant professor of supply chain management at Tilburg School of Economics and Management, Tilburg University. He received his Ph.D. in business administration from Arizona State University. His research interests include supply network structure, multi-tier supply chain management, and behavioral decision-making by supply chain managers.
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