Directionality in collaborative innovation: governing inter-firm relationships in the supply-chain

Abstract

This paper investigates the link between how firms govern the relationships with their counterparts in vertical networks and the likelihood of developing product and/or process innovation by reporting the results of a survey on Italian automotive suppliers. Results show that actors do not select coordination mechanisms according to the type of innovation activity carried out. Conversely, different patterns of governance emerge if one distinguishes between companies transacting downstream (e.g. a second tier supplier selling their components/systems to a first tier one) and upstream (e.g. a second tier supplier buying component/system by a third tier one). In the first case, firms are more liable of innovating with their counterpart when adopting contractual governance tools. In the second case, companies are more liable to innovate with their counterpart if “trust” and “trust building practices” are in place.