Supplier-Buyer Networks and Buyer's Innovation

Abstract

We examine the effects of supplier network structure on the innovation performance of buyer firms. We analyze these effects from both positional and relational perspectives - focusing on two specific dimensions of the supplier’s network a) the supplier’s centrality in its network of buyers and suppliers and b) the strength of the tie between suppliers and buyers. We theorized and found two main effects regarding the impact of the supplier's network centrality on the buyer's innovation output: a supplier’s centrality in the network of suppliers enhances the focal buyer’s innovation but a supplier’s centrality in the network of buyers diminishes the focal buyer’s innovation. We also found that these two main effects are moderated by the strength of the ties in the direct relationships. Specifically, we found that strong ties between the focal buyer and its suppliers reduce the innovative benefits of supplier centrality in the network of suppliers and higher relative strength in the ties between a buyer and its suppliers diminishes the negative effect of the supplier’s centrality in the network of buyers. These arguments and findings have several implications for the social network and buyer-supplier relationships literature that we identify.