The strength of long ties and the weakness of strong ties: Knowledge diffusion through supply chain networks

Yasuyuki Todo,Petr Matous,Hiroyasu Inoue

doi:10.1016/j.respol.2016.06.008

Yasuyuki Todo, Petr Matous + Show 1 more

Open Access

https://doi.org/10.1016/j.respol.2016.06.008

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Abstract

Using a large firm-level panel dataset for Japan, this paper examines the effects of the structure of supply chain networks on productivity and innovation capability through knowledge diffusion. We find that ties with distant suppliers improve productivity (as measured by sales per worker) more than ties with neighboring suppliers, which is likely because distant firms’ intermediates embody more diversified knowledge than those from neighboring firms. Ties with neighboring clients improve productivity more than ties with distant clients, which is likely because neighboring clients more effectively diffuse disembodied knowledge than distant clients. By contrast, ties with distant suppliers and clients improve innovative capability (as measured by the number of registered patents), whereas ties with neighboring suppliers or clients do not affect innovative capability. In addition, the density of a firm's ego network (as measured by how densely its supply chain partners transact with one another) has a negative effect on productivity and innovative capability, implying knowledge redundancy in dense networks. These results suggest that access to diversified ties is important for improving productivity and innovation capability through knowledge diffusion.

Highlights

Growth in productivity and innovation capability of firms is largely affected by diffusion of knowledge, technology, and information from other firms (Bloom et al, 2013; Romer, 1990)
The results imply that ties with neighboring suppliers are less likely to improve productivity through knowledge diffusion, while ties with distant suppliers are more likely to do so
This paper examines the effect of the structure of supply chain networks on productivity and innovation capability through knowledge diffusion, using firm-level panel data for Japan

Summary

Introduction

Growth in productivity and innovation capability of firms is largely affected by diffusion of knowledge, technology, and information from other firms (Bloom et al, 2013; Romer, 1990). Possible channels of such knowledge diffusion include buyer-supplier relations between firms, because buyers often provide new knowledge to their suppliers to procure high-quality products (Dyer and Nobeoka, 2002). Knowledge diffusion through buyer-supplier relations has been tested extensively in the empirical literature, in which an improvement in measures of productivity and innovation capability associated with such relations is considered to reflect knowledge diffusion. Knowledge diffusion through international trade is examined by Crespi et al (2008a), Kimura and Kiyota (2006), Lööf and Andersson (2010), Piermartini and Rubínová (2014), and Van Biesebroeck (2005), among many others. Javorcik (2004) shows evidence of knowledge spillovers from foreign-owned firms to their upstream suppliers

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