OEM Pressure to Innovate and Buyer-Supplier Relationship: An Abstract
Innovation is considered to be one of the most important sources of sustainable competitive advantage in a dynamic environment. While innovation capability is widely viewed as competitive advantage, extant literature has also recognized the existence of hurdles in the successful practice and implementation of innovation. In an uncertain and intensely competitive business environment, it is not uncommon for organizations to pass on innovation tasks to supply chain partners. OEMs often pass on innovation introduction activities to their suppliers. This research seeks to determine whether such “Innovation Pressure” is conducive to good supplier-OEM relationships and to also explore the nature of the above relationship. A research model consists of a construct representing overall supplier-OEM relationship, a set of five intermediate relationship constructs, and two initial variables, one representing price pressure and the other representing pressure to innovate are developed. After following a detailed scale development procedure, data were collected from suppliers in the automobile light vehicle industry and the aircraft industry. The use of structural equation analysis and the application of other confirmatory factor analytic techniques show differences in the impact of the two initial variables on the outcome variable. Innovation pressure has several more positive links with the intermediate variables as well as the dependent variable than price pressure has. This may be because OEM pressure to innovate is often viewed more favorably by members of the supply chain than is OEM pressure to lower prices. For both initial variables, the negative paths in the mediation process are not necessarily unsurmountable hurdles. Favorable managerial actions that influence the intermediate variables can offset the possible negative impact of OEM pressure viewed as being adversarial.
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