AFA 2015 Boston Meetings
47 Pages Posted: 5 Oct 2014 Last revised: 10 Aug 2015
Date Written: August 8, 2015
This paper studies the effect of timely feedback along the supply chain on motivating innovation. We use the geographical distance between a supplier and its major customers to capture the ease and intensity of timely feedback from customers to their suppliers. To establish causality, we explore plausibly exogenous variation in distance caused by customer headquarters relocations. In a difference-in-differences framework, we show that timely feedback from customers has a positive effect on supplier innovation. The effect is stronger when the customers are more innovative themselves and are within closer technology proximity with the suppliers. Our paper provides thefirst analysis that tests the feedback effect proposed in Manso (2011) and sheds new light on the real effect of customer-supplier relationship along the supply chain.
Keywords: Feedback effect; Innovation; Incentive Schemes; Supply Chain
JEL Classification: G31, O31
Suggested Citation: Suggested Citation
Chu, Yongqiang and Tian, Xuan and Wang, Wenyu, Learning from Customers: Corporate Innovation along the Supply Chain (August 8, 2015). AFA 2015 Boston Meetings. Available at SSRN: https://ssrn.com/abstract=2505029 or http://dx.doi.org/10.2139/ssrn.2505029