Suppliers versus start-ups: Where do better innovation ideas come from?

Abstract

In the innovation process of firms, suppliers increasingly play a key role as external sources of ideas. Although the beneficial impact of supplier integration has been acknowledged, there is also evidence that not all such innovation efforts are successful, particularly regarding the identification of truly innovative solutions. Therefore, in recent years, large firms have begun to move beyond their existing supply base, drawing on innovation ideas from start-ups, that is, with young firms with whom they have no pre-existing bonds. Yet there is no empirical evidence regarding whether start-ups’ ideas actually outperform those of established suppliers. We address this question by presenting a unique, real-world comparison of 314 supplier and start-up ideas – ideas that were identified, evaluated, and followed up over the course of an open innovation initiative conducted by a large automotive manufacturer. We find that start-ups’ ideas are characterized by a higher degree of novelty and to some extent higher benefit for end customers but, on the downside, are less likely to be implemented than suppliers’ ideas. Overall, our study adds new dimensions to the discourse on open innovation and provides valuable insights regarding the outcome of supplier and start-up involvement in the front end of the innovation process.