Complementarity effect of supply chain competencies on innovation capability

Purpose From the perspective of the economic theory of complementarity, the purpose of this paper is to examine how internal collaboration and external competencies would provoke and strengthen each other, and subsequently enhance organizational innovation capability. Design/methodology/approach The survey data were collected from 201 manufacturing firms and checked for common method variance, validity and reliability. Structural equation modeling was then used to test the hypothetical complementarity effect. Findings The results suggest that internal collaboration (as a manifestation of exploitative learning) and external competencies, which include supply network flexibility and supplier operational capabilities (as manifestation of exploratory learning), do in fact compensate for each other’s deficiencies. Complementary deployment of internal collaboration and external competencies enhances each other’s contribution to innovation capability. Practically, the study indicates that organizations should consider making concerted efforts to develop internal collaboration, supply network flexibility and supplier operational capability as a bundle. Originality/value Extensive discussions exist in the literature on exploration and exploitation being essential components of innovation and their conflicting impact on innovation efficiency and effectiveness. But how an organization should operationally develop supply chain competencies in order to maximize overall innovation capability still remains largely an unanswered question. The current study advances the research on the inter-relationships between exploration and exploitation by empirically demonstrating the complementary nature of internal collaboration and external competencies in developing sustainable innovation capabilities.

[1]  P. Bentler,et al.  Comparative fit indexes in structural models. , 1990, Psychological bulletin.

[2]  A. Langley,et al.  The Dynamics of Collective Leadership and Strategic Change in Pluralistic Organizations , 2001 .

[3]  D. Teece.  Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy , 1993 .

[4]  Maryam Emami,et al.  Explorative learning strategy and its impact on creativity and innovation: An empirical investigation among ICT-SMEs , 2017, Bus. Process. Manag. J..

[5]  Changsu Kim,et al.  Learning and innovation: Exploitation and exploration trade-offs☆ , 2012 .

[6]  M. Audrey Korsgaard,et al.  Procedural Justice in Performance Evaluation: The Role of Instrumental and Non-Instrumental Voice in Performance Appraisal Discussions , 1995 .

[7]  Elias G. Carayannis,et al.  An exploration of contemporary organizational artifacts and routines in a sustainable excellence context , 2017, J. Knowl. Manag..

[8]  Danny Samson,et al.  Innovation capability in Australian manufacturing organisations: an exploratory study , 2014 .

[9]  Michael G. Harvey,et al.  Global supply chain management: The selection of globally competent managers , 2001 .

[10]  David F. Larcker,et al.  Structural Equation Models with Unobservable Variables and Measurement Error: Algebra and Statistics: , 1981 .

[11]  Marko Sarstedt,et al.  Direct and configurational paths of absorptive capacity and organizational innovation to successful organizational performance , 2016 .

[12]  R. Klassen,et al.  Experimental comparison of Web, electronic and mail survey technologies in operations management , 2001 .

[13]  Cristiano Ciappei,et al.  Ambidextrous organization and agility in big data era: The role of business process management systems , 2018, Bus. Process. Manag. J..

[14]  Michael A. Abebe,et al.  Organizational and competitive influences of exploration and exploitation activities in small firms , 2014 .

[15]  K. Lai,et al.  “Black‐box” and “gray‐box” supplier integration in product development: Antecedents, consequences and the moderating role of firm size , 2007 .

[16]  Karel Cool,et al.  Asset stock accumulation and sustainability of competitive advantage , 1989 .

[17]  Karel Cool,et al.  Asset Stock Accumulation and the Sustainability of Competitive Advantage: Reply , 1989 .

[18]  M. Browne,et al.  Alternative Ways of Assessing Model Fit , 1992 .

[19]  A. Salter,et al.  Open for innovation: the role of openness in explaining innovation performance among U.K. manufacturing firms , 2006 .

[20]  Julian Birkinshaw,et al.  Organizational Ambidexterity: Balancing Exploitation and Exploration for Sustained Performance , 2009, Organ. Sci..

[21]  Nicolette Lakemond,et al.  INTERNAL INTEGRATION IN COMPLEX COLLABORATIVE PRODUCT DEVELOPMENT PROJECTS , 2016 .

[22]  B. Menguc,et al.  Balancing exploration and exploitation: The moderating role of competitive intensity , 2005 .

[23]  Richard P. Bagozzi,et al.  Assessing Construct Validity in Organizational Research , 1991 .

[24]  Bjørge Timenes Laugen,et al.  Open innovation: on the influence of internal and external collaboration on degree of newness , 2017, Bus. Process. Manag. J..

[25]  Peter Mühlau,et al.  Human resource systems and employee performance in Ireland and the Netherlands: a test of the complementarity hypothesis , 2006 .

[26]  D. Dougherty,et al.  Sustained product innovation in large, mature organizations: Overcoming innovation-to-organization problems. , 1996 .

[27]  José Luis Coca-Pérez,et al.  Analyzing the relationship between exploration, exploitation and organizational innovation , 2017, J. Knowl. Manag..

[28]  P. David.  Why are institutions the ‘carriers of history’?: Path dependence and the evolution of conventions, organizations and institutions , 1994 .

[29]  C. Fornell,et al.  Evaluating structural equation models with unobservable variables and measurement error. , 1981 .

[30]  Paul Milgrom,et al.  Complementarities and fit strategy, structure, and organizational change in manufacturing , 1995 .

[31]  A. Oke,et al.  Managing disruptions in supply chains: A case study of a retail supply chain , 2009 .

[32]  I. N. Pujawan,et al.  Assessing supply chain flexibility: a conceptual framework and case study , 2004 .

[33]  S. S. Rao,et al.  SUPPLY MANAGEMENT, SUPPLY FLEXIBILITY AND PERFORMANCE OUTCOMES: AN EMPIRICAL INVESTIGATION OF MANUFACTURING FIRMS , 2010 .

[34]  Stefano Bresciani,et al.  Open innovation in multinational companies' subsidiaries: the role of internal and external knowledge , 2017 .

[35]  César Camisón,et al.  Organizational innovation as an enabler of technological innovation capabilities and firm performance , 2014 .

[36]  R. Henderson.  Underinvestment and Incompetence as Responses to Radical Innovation: Evidence From the Photolithographic Alignment Equipment Industry , 2015 .

[37]  J. March.  Exploration and exploitation in organizational learning , 1991, STUDI ORGANIZZATIVI.

[38]  M. Tushman,et al.  The ambidextrous organization. , 2004, Harvard business review.

[39]  Marjorie A. Lyles,et al.  Absorbing the Concept of Absorptive Capacity: How to Realize Its Potential in the Organization Field , 2009 .

[40]  Albert H. Segars,et al.  Assessing the unidimensionality of measurement : a paradigm and illustration within the context of information systems research , 1997 .

[41]  Hartini Ahmad,et al.  Assessing the relationship between firm resources and product innovation performance: A resource-based view , 2010, Bus. Process. Manag. J..

[42]  Ian P. McCarthy,et al.  Achieving Contextual Ambidexterity in R&D Organizations: A Management Control System Approach , 2011, SSRN Electronic Journal.

[43]  C. Oliver.  Determinants of Interorganizational Relationships: Integration and Future Directions , 1990 .

[44]  Nils Stieglitz,et al.  Innovations and the Role of Complementarities in a Strategic Theory of the Firm , 2007 .

[45]  Daniel A. Levinthal,et al.  ABSORPTIVE CAPACITY: A NEW PERSPECTIVE ON LEARNING AND INNOVATION , 1990 .

[46]  P. Bentler,et al.  Significance Tests and Goodness of Fit in the Analysis of Covariance Structures , 1980 .

[47]  Desirée Knoppen,et al.  Towards an empirical typology of buyer–supplier relationships based on absorptive capacity , 2013 .

[48]  Nicholas Argyres.  CAPABILITIES, TECHNOLOGICAL DIVERSIFICATION AND DIVISIONALIZATION , 1996 .

[49]  D. Teece,et al.  DYNAMIC CAPABILITIES AND STRATEGIC MANAGEMENT , 1997 .

[50]  J. Rice,et al.  SUPPLY CHAIN VS. SUPPLY CHAIN: THE HYPE AND THE REALITY. , 2001 .

[51]  Joseph P. Cannon,et al.  Buyer–Seller Relationships in Business Markets , 1999 .

[52]  Constantine Andriopoulos,et al.  Exploitation-Exploration Tensions and Organizational Ambidexterity: Managing Paradoxes of Innovation , 2009, Organ. Sci..

[53]  Robert E. Hoskisson,et al.  Resource complementarity in business combinations: Extending the logic to organizational alliances , 2001 .

[54]  Daniel A. Levinthal,et al.  The myopia of learning , 1993 .

[55]  Mohamed G. Aboelmaged,et al.  Harvesting organizational knowledge and innovation practices: An empirical examination of their effects on operations strategy , 2012, Bus. Process. Manag. J..

[56]  Wenpin Tsai.  Knowledge Transfer in Intraorganizational Networks: Effects of Network Position and Absorptive Capacity on Business Unit Innovation and Performance , 2001 .

[57]  M. Sutherland,et al.  A management dilemma : positioning employees for internal competition versus internal collaboration. Is coopetition possible? , 2016 .

[58]  Mile Terziovski,et al.  INTELLECTUAL PROPERTY APPROPRIATION STRATEGY AND ITS IMPACT ON INNOVATION PERFORMANCE , 2016 .

[59]  M. Crossan,et al.  Organizational learning and strategic renewal , 2003 .

[60]  C. Crouch.  Complementarity and Fit in the Study of Comparative Capitalisms , 2005 .

[61]  R. Narasimhan,et al.  Effect of supply chain integration on the relationship between diversification and performance: evidence from Japanese and Korean firms , 2002 .

[62]  Petra Christmann.  Effects of “Best Practices” of Environmental Management on Cost Advantage: The Role of Complementary Assets , 2000 .

[63]  Georg Schreyögg,et al.  Organizational Path Dependence: Opening the Black Box , 2009 .

[64]  Jens Mueller,et al.  Ambidextrous IT capabilities and business process performance: an empirical analysis , 2018, Bus. Process. Manag. J..

[65]  Haisu Zhang,et al.  Managing Knowledge for Innovation: The Role of Cooperation, Competition, and Alliance Nationality , 2010 .

[66]  Gilbert A. Churchill.  A Paradigm for Developing Better Measures of Marketing Constructs , 1979 .

[67]  N. Venkatraman,et al.  Knowledge relatedness and the performance of multibusiness firms , 2005 .

[68]  David L. Deeds,et al.  Exploration and Exploitation Alliances in Biotechnology: A System of New Product Development , 2004 .

[69]  Alexander E. Ellinger.  Improving Marketing/Logistics Cross-Functional Collaboration in the Supply Chain , 2000 .

[70]  I. Chen,et al.  Towards a theory of supply chain management: the constructs and measurements , 2004 .

[71]  Veikko Hara,et al.  Towards Networked R&D Management: The R&D Approach of Sonera Corporation as an Example , 2004 .

[72]  A. Roth,et al.  The effect of an ambidextrous supply chain strategy on combinative competitive capabilities and business performance , 2010 .

[73]  Bart Nooteboom,et al.  Innovation and inter-firm linkages: new implications for policy , 1999 .

[74]  Curba Morris Lampert,et al.  Entrepreneurship in the large corporation: a longitudinal study of how established firms create breakthrough inventions , 2001 .

[75]  Robert J. Vokurka,et al.  The empirical assessment of construct validity , 1998 .

[76]  Diane A. Mollenkopf,et al.  A global supply chain framework , 2004 .

[77]  James C. Anderson,et al.  STRUCTURAL EQUATION MODELING IN PRACTICE: A REVIEW AND RECOMMENDED TWO-STEP APPROACH , 1988 .

[78]  John L. Campbell,et al.  The Oxford Handbook of Comparative Institutional Analysis , 2010 .

[79]  T. Elfring,et al.  How does trust affect the performance of ongoing teams? The mediating role of reflexivity, monitoring, and effort. , 2010 .

[80]  A. Ferraris,et al.  The management of organizational ambidexterity through alliances in a new context of analysis: Internet of Things (IoT) smart city projects , 2017, Technological Forecasting and Social Change.

[81]  Boris V. Sokolov,et al.  A multi-structural framework for adaptive supply chain planning and operations control with structure dynamics considerations , 2010, Eur. J. Oper. Res..

[82]  Richard Deeg.  Complementarity and institutional change in capitalist systems , 2007 .

[83]  Willow A. Sheremata.  Centrifugal and Centripetal Forces in Radical New Product Development Under Time Pressure , 2000 .

[84]  R. P. McDonald,et al.  Structural Equations with Latent Variables , 1989 .

[85]  Henk W. Volberda,et al.  Absorbing the Concept of Absorptive Capacity: How to Realize Its Potential in the Organization Field , 2009 .

[86]  Sang M. Lee,et al.  Ambidextrous supply chain as a dynamic capability: building a resilient supply chain , 2016 .

[87]  S. Vickery,et al.  The effects of internal versus external integration practices on time-based performance and overall firm performance , 2004 .

[88]  R. Willig,et al.  Economies of scope , 1981 .

[89]  Henk W. Volberda,et al.  Co-evolution of Firm Absorptive Capacity and Knowledge Environment: Organizational Forms and Combinative Capabilities , 1999 .

[90]  M. Kotabe,et al.  Gaining from vertical partnerships : Knowledge transfer, relationship duration and supplier performance improvement in the U.S. and Japanese automotive industries , 2003 .

[91]  William E. Souder,et al.  New Product Development Performance and the Interaction of Cross‐Functional Integration and Knowledge Management , 2005 .

[92]  Anne T. Coughlan,et al.  Distribution channel choice in a market with complementary goods , 1987 .

[93]  S. Wheelwright,et al.  Restoring Our Competitive Edge: Competing Through Manufacturing , 1984 .

[94]  Reinhilde Veugelers,et al.  In Search of Complementarity in Innovation Strategy: Internal R&D and External Knowledge Acquisition , 2006, Manag. Sci..

[95]  Scott B. MacKenzie,et al.  Common method biases in behavioral research: a critical review of the literature and recommended remedies. , 2003, The Journal of applied psychology.

[96]  Sung Joo Bae,et al.  Internalization of R&D outsourcing: An empirical study , 2012 .

[97]  Keith D. Brouthers,et al.  International Risk and Perceived Environmental Uncertainty: The Dimensionality and Internal Consistency of Miller's Measure , 1996 .

[98]  Maurizio Zollo,et al.  Deliberate Learning and the Evolution of Dynamic Capabilities , 2002 .

[99]  Bhanu S. Ragu-Nathan,et al.  The impact of supply chain management practices on competitive advantage and organizational performance , 2006 .

[100]  Barry L. Bayus,et al.  Product Complements and Substitutes in the Real World: The Relevance of “Other Products” , 2004 .

[101]  Manoj K. Malhotra,et al.  Measuring dimensions of manufacturing flexibility , 2004 .

[102]  Manuel Sánchez-Pérez,et al.  Exploitation- and exploration-based innovations: The role of knowledge in inter-firm relationships with distributors , 2011 .

[103]  S. Clegg.  The SAGE Handbook of Organization Studies , 2006 .

[104]  Kent D. Miller.  Industry and Country Effects on Managers' Perceptions of Environmental Uncertainties , 1993 .

[105]  Alan W. Mackelprang,et al.  Are internal manufacturing and external supply chain flexibilities complementary capabilities , 2012 .

[106]  Julían Andrés,et al.  La gestión del conocimiento y su influencia en las capacidades dinámicas: Contrastación empírica en Empresas Colombianas Intensivas en uso de conocimiento , 2020 .

[107]  M. Westerlund,et al.  Learning and innovation in inter‐organizational network collaboration , 2010 .