Orchestrating resources with suppliers for product innovation
Francesco Chirico, Lucia Naldi, Michael A. Hitt, Philipp Sieger, David G. Sirmon, Kai Xu
kHUB post date: October 3, 2024
Originally published: 20 October 2023 (PDMA JPIM • Vol. 41, Issue 4 • July 2024)
Read time: 70 minutes
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How orchestrating external, supplier-provided resources affects product innovation is an important question. While product innovation is essential to achieve a competitive advantage, it is costly as it requires significant investments. It thus puts a severe strain on firm resources, which is particularly critical for resource-scarce small–medium enterprises (SMEs). Therefore, these firms must combine their own resources with those of external parties, particularly suppliers, to enhance their product innovation. However, knowledge about how orchestrating these resources affects product innovation is limited, because empirical studies on resource orchestration have largely focused on firm-internal resources; furthermore, there is ambiguity regarding the extent to which drawing on external resources is beneficial. In addition, the conditions that affect the resource orchestration–product innovation relationship remain unexplored. Therefore, we focus on supplier logistics integration (SLI), an important resource orchestration action referring to the orchestration of external, supplier-provided resources; we draw on the resource orchestration framework and the related work on organizational rigidity to theorize that there is an inverted U-shaped relationship between SLI and product innovation. Additionally, we suggest that learning orientation and environmental dynamism mitigate rigidities associated with high levels of SLI and thus facilitate the translation of SLI into product innovation. Testing our hypotheses with data from Swedish SMEs supports our theorizing and provides important contributions. Most importantly, we extend the resource orchestration framework to include the focus on external, supplier-provided resources, thereby advancing our knowledge and understanding of resource orchestration for product innovation in SMEs.
Practitioner points
- Supplier logistics integration (SLI) is critical for providing high quality and innovative products to customers.
- The effectiveness of the processes involved in combining resources between the focal firm and suppliers and in coordinating the use of those resources are critical for many firms' ability to satisfy their customers' needs.
- Care must be taken in SLI because at some point, the relationship may become a constraint on a firm's ability to be innovative and to meet customers changing needs. SME managers should monitor firm relationships with their supply partners to identify any signs of counterproductive outcomes; that is, they should build quality relationships with suppliers while maintaining a degree of flexibility to ensure that they do not become overly embedded.
- Firms that fail to develop a learning orientation and that do not respond effectively to the uncertainty created by the external environment are more likely to become “locked” into a supply chain relationship that ultimately inhibits their innovation.