INNOVATION FOR BUYERS AND SUPPLIERS
In today’s competitive world, innovation is an essential aspect of successful business performance. For an emerging market like Pakistan, the supply chain is a potential source of product innovation, but efforts need to be made for it to function efficiently and effectively. The buyer’s innovation strategy enhances the supplier’s innovation focus, as well as the buyer-seller relationship that supports product innovation. Using the resource dependence theory, authors Muhammad Shakeel Jajja, Vijay R. Kannan, Shaukat Ali Brah, and Syed Zahoor Hassan find linkages among firm innovation strategy, suppliers’ orientation and actions, product innovation, and business performance. This article details how the strategic alignment of the buyer and supplier around product innovation actually leads to innovation and better performance outcomes.
The authors conducted surveys with managers of Pakistani and Indian companies who were familiar with their firms’ supply chain operations. The authors report several findings that have important managerial implications. Innovation breeds innovation, i.e., the innovation ability of the buyers increases when they work with innovative suppliers who possess resources such as creative employees, information, and research and development capability. Thus firms need to focus on the selection and management of suppliers that are strategically aligned with the firm’s innovation goals. It is also important that the supporting infrastructure for innovation is available in the organisational supply chain. Managers should develop internal innovation capabilities, partner with like-minded organisations, and create conditions for effective cooperation — all essential factors to bring about innovation outcomes.
To minimise the uncertainties that occur in organisations, innovation-focused companies should develop systems to enhance supplier engagement in the innovation process. Such collaborations improve communication channels, product and process development, and mutual alignment of goals and delivery activities. Firms in developing countries have to work harder to build inter-organisational communication, trust, and information sharing. Foreign collaborations are beneficial in this regard as they bring with them many advantages — investment, new technologies, management experience, and a broader perspective with respect to innovation, competition, and awareness of changing customer preferences.
Product innovation is greatly enhanced by involving suppliers, utilising inter-organisational teams, focusing on innovation within and between supply chain partner facilities, and sharing accurate and relevant information across the supply chain. A supportive buyer-supplier relationship results in the sharing of long-term and mutual goals; clarity of expectations between both parties helps reduce ambiguities. The innovation goals need to be clearly defined, i.e., whether the focus is on domestic or international markets, incremental or substantive innovation, etc.
Developing countries like Pakistan and India have additional concerns like whether to concentrate on affordable innovation in rapidly growing price-sensitive market segments, or focus on high-value market segments.
These factors influence the level and type of competition faced, partner selection, investment needed to support innovation, etc. Of course, access to capital substantially impacts the product innovation outcomes, caeteris paribus. Eventually, all these factors facilitate product innovation, which in turn has a positive impact on business performance.
Jajja, M.S.S., Kannan, V.R., Brah, S.A., and Hassan, S.Z. (2017). Linkages between firm innovation strategy, suppliers, product innovation, and business performance: insights from resource dependence theory. International Journal of Operations and Production Management, 37(8), 1054-1075.
About the Authors
M. Shakeel S. Jajja is Assistant Professor at the SDSB, LUMS. He teaches courses in operations, supply chain management, supply chain analysis, and innovation and technology management. He is also the director for the executive programme in Agribusiness Management. His research interests include supply chain management, technology and innovation in supply chain relationships, social and environmental compliance in supply chain relationships, and operations management. His research has been published in the International Journal of Operations and Production Management.
Syed Zahoor Hassan is Professor at the SDSB, LUMS. He teaches courses in operations, innovation and technology management, agribusiness and value chain management, innovation and emerging trends, and strategy and management in developing economies. His research interests include information systems development methodologies, global software development, information technology utilisation effectiveness, and management of technology. His research has been published in the International Journal of Operations and Production Management.