Understanding competition, cooperation and their interplay in supplier network: implication on manufacturer’s innovation

Abstract

PurposeA manufacturer with complex end-products can play the “hub firm” role in its supplier network and manage the relationship among its suppliers, but it mostly does not know how to manage suppliers’ coopetitive relationship for improving its innovation. This study aims to investigate the influence of horizontal supplier–supplier (S-S) competition and cooperation in the supplier network on the quantity and quality of manufacturer’s innovation, to unravel the manufacturers’ coopetitive strategic sourcing.Design/methodology/approachThe study conducts negative binomial regression using the data from 130 listed Japanese manufacturers and their first-tier supplier networks as the analysis unit.FindingsThe results indicate that both S-S competition and cooperation have inverted U-shaped effects on manufacturers’ innovation. As to the interplay of S-S competition and cooperation in driving manufacturers’ innovation, the one weakens the other’s inverted U-shaped role. It also shows that simultaneously maintaining moderate cooperation and competition among suppliers is a good choice for manufacturer innovation, and when there is high S-S competition, motivating high cooperation among suppliers is also a way to enhance manufacturers’ innovation. All of the effects are more significant and robust on the innovation quality than the innovation quantity.Originality/valueThis study contributes to linking the dyadic analysis of vertical relationships to the network analysis of horizontal S-S relations and exploring the under-researched interplay between competition and cooperation in driving the ego firm’s innovation. It provides insights to manufacturers’ policymakers on how to strategically manage their supplier networks and S-S coopetition to improve their innovation performance.