Supplier Innovation Strategy: Transactional Hazards and Innovation in the Automotive Supply Chain

42 Pages Posted: 21 Feb 2015

See all articles by Jennifer W. Kuan

Jennifer W. Kuan

Tulane University - A.B. Freeman School of Business

Daniel C. Snow

Brigham Young University - J. Willard and Alice S. Marriott School of Management

Susan Helper

Case Western Reserve University - Department of Economics

Date Written: November 17, 2014

Abstract

Over the last few decades, innovation has doubled automobile performance at a time when outsourcing has increased. But outsourcing is subject to well-known contracting hazards that would also afflict outsourcing for innovation. In this paper, we examine how supplier firms generate innovation in the presence of such hazards, using a recent survey of the US automotive supply chain that contains new measures of innovative activity. Taking the supplier perspective on the traditionally buyer-framed make-or-buy problem pays surprising dividends. First, we identify three supplier innovation strategies — distinct combinations of various innovative activities. Next, we find evidence that each strategy represents a response to the transactional hazards associated with innovating in this environment. Finally, the coexistence of heterogeneous supplier strategies enhances our understanding of the buyer’s make-or-buy problem, providing a more complex picture of the various approaches to transactional hazards that buyers employ simultaneously.

Keywords: transaction costs, automotive, supply chain, innovation

JEL Classification: L62, L22, O31, O32

Suggested Citation

Kuan, Jennifer W. and Snow, Daniel C. and Helper, Susan, Supplier Innovation Strategy: Transactional Hazards and Innovation in the Automotive Supply Chain (November 17, 2014). Available at SSRN: https://ssrn.com/abstract=2567536 or http://dx.doi.org/10.2139/ssrn.2567536

Jennifer W. Kuan (Contact Author)

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

Daniel C. Snow

Brigham Young University - J. Willard and Alice S. Marriott School of Management ( email )

Provo, UT 84602
United States

Susan Helper

Case Western Reserve University - Department of Economics ( email )

Cleveland, OH 44106
United States
216-368-5541 (Phone)
216-368-5542 (Fax)

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