The Bright Side and Dark Side of Embedded Ties in Business-to-Business Innovation

Abstract

While the number and importance of joint innovation projects between suppliers and their customers continue to rise, the literature has yet to resolve a key question — do embedded ties with customers help or hurt supplier innovation? Drawing on both the tie strength and knowledge literatures, we theorize that embedded ties interact with supplier and customer innovation knowledge to influence supplier innovation. In a sample of 157 Dutch business-to-business innovation relationships, we observe that embedded ties weaken how much suppliers benefit from customer innovation knowledge due to worries about customer opportunism (the dark side of embedded ties). However, we uncover three moderating relationship and governance features that allow suppliers to overcome these dark-side effects and even increase innovation (the bright side of embedded ties). Finally, although we predicted a bright-side effect, we find that embedded ties neither help nor hurt the supplier to leverage its own innovation knowledge in the relationship.

Keywords: embedded ties, knowledge, business-to-business partnerships, innovation, co-creation, dark side, bright side

JEL Classification: C44, M31, M