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Friend or foe: Customer-supplier relationships and innovation

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Presentation on theme: "Friend or foe: Customer-supplier relationships and innovation"— Presentation transcript:

1 Friend or foe: Customer-supplier relationships and innovation
Marcin Krolikowski, Xiaojing Yuan(2017,Journal of Business Research) Quoted by Mengdi Guo( )

2 CONTENT 01 Research Question 02 Hypotheses Development 03
Research Dsign 04 Summarize

3 01 Research Question This study attempts to address how customer-supplier relationships can shape a firm's research and development (R & D) strategies and innovation outcome by exploring customer-supplier relationship dynamics.

4 02 Hyppoyheses Development
First, strong customer-supplier relationships encourage suppliers to increase their relationship-specific and R & D investments, consistent with predictions in the transaction cost economics (TCE) theory developed by Williamson (1979). Second,the finding might imply that because of potentially high customer switching costs driven by relationship-specific investments, suppliers are more actively engaged in research and product development as a defensive strategy to maintain their competitive position in the product market. Hypothesis 1. High customer concentration promotes suppliers' R & D intensity and innovation. 04

5 02 Hyppoyheses Development
Customers have more incentives to bargain either when they have a large pool of suppliers or if inputs from suppliers account for a larger proportion of their costs of goods sold. When customers bargain over costs and end up with full control over their suppliers' gross profits, suppliers' profitability will decrease, leaving them with fewer resources to allocate to R & D investments and innovations. Additionally, based on the theory of incomplete contracts, hold-up problems arise when one party, concerned about the other party's increasing power, refrains from making ex-ante investments. Hypothesis 2. Strong customer bargaining power hinders suppliers' R & D intensity and innovation. 04

6 03 Research Design 3.1Data This study obtains the initial sample of customers and suppliers from Compustat Segment.After merging with the customer and supplier links data, the sample contains 26,791 U.S. supplier and customer pairs with no missing book equity and market equity over the period from June 30,1980 to March 31, 2005.The sample excludes very small suppliers with assets of less than $10 million because these firms are likely to have missing or poor accounting information. Data on patent and patent citation are obtained from the National Bureau of Economic Research (NBER) patent database. After merging these databases and deleting observations with missing values on variables, the final sample contains a panel of 7057 supplier-year observations with necessary information from Compustat for analysis purpose.this study winsorizes all continuous variables at their 1% and 99% levels to avoid problems driven by outliers. Lorem Ipsum Dolor Sit Lorem Ipsum Dolor Sit Lorem Ipsum Dolor Sit Lorem Ipsum Dolor Sit Lorem Ipsum Dolor Sit Er Elit Lamet, Consectetaur Cillium Adipisicing Pecu. Lorem Ipsum Dolor Sit Er Elit Lamet, Consectetaur Cillium Adipisicing Pecu.

7 03 Research Design 3.2Measures of Variables Measures of Innovation
R & D Intensity is R & D expenditures in year t + 1 scaled by lagged total assets Innovation is measured using innovation intensity , innovation importance and innovation efficiency in year t + 1. Measures of the Customer-supplier Relationship CCR is Customer Concentration Ratio CBP is Customer Bargaining Power for supplier i in year t Controls firm size, age, growth opportunities, profitability,leverage, time-fixed effects, and industry-fixed effects Lorem Ipsum Dolor Sit Lorem Ipsum Dolor Sit Lorem Ipsum Dolor Sit Lorem Ipsum Dolor Sit Lorem Ipsum Dolor Sit Er Elit Lamet, Consectetaur Cillium Adipisicing Pecu. Lorem Ipsum Dolor Sit Er Elit Lamet, Consectetaur Cillium Adipisicing Pecu.

8 03 Research Design 3.3Model Lorem Ipsum Dolor Sit
Lorem Ipsum Dolor Sit Er Elit Lamet, Consectetaur Cillium Adipisicing Pecu. Lorem Ipsum Dolor Sit Er Elit Lamet, Consectetaur Cillium Adipisicing Pecu.

9 01 03 02 04 04 Summarize 4.1 Conclusion 4.2Contributions
The findings imply that a concentrated customer base, which reflects a strong customer-supplier relationship aswell as high switching costs, motivates suppliers to invest more in R & D and become more innovative. However,the evidence also suggests that strong customer bargaining power creates hold-up problems and forces suppliers to invest less in R & D and innovation. 4.2Contributions First,this study expands this area and provides empirical evidence that customer concentration and customer bargaining power have a strong impact on the supplier's process innovation and product innovation. Second, this paper extends studies on relationship-specific investment,supply chain management, and hold-up problems Lorem Ipsum Dolor Sit Er Elit Lamet, Consectetaur Cillium Adipisicing Pecu. Lorem Ipsum Dolor Sit Er Elit Lamet, Consectetaur Cillium Adipisicing Pecu. 01 03 Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum 02 04 Lorem Ipsum Dolor Sit Er Elit Lamet, Consectetaur Cillium Adipisicing Pecu. Lorem Ipsum Dolor Sit Er Elit Lamet, Consectetaur Cillium Adipisicing Pecu.

10 01 03 02 04 04 Summarize 4.3Limitions & Future Research
This paper does not disentangle whether the motivation is the high integration of the supply chain, the threat of high switching costs, or both because the two coexist. Furthermore, high integration can cause high switching costs to suppliers. This perhaps is one of the limitations of this study and could be explored in future research. This paper also could not directly test quality measures of interorganizational relations such as trust, explicit contract terms, the degree of power imbalance, et cetera. Thus, this study calls for investigations in these areas in future research. Lorem Ipsum Dolor Sit Er Elit Lamet, Consectetaur Cillium Adipisicing Pecu. Lorem Ipsum Dolor Sit Er Elit Lamet, Consectetaur Cillium Adipisicing Pecu. 01 03 Lorem Ipsum Lorem Ipsum Lorem Ipsum Lorem Ipsum 02 04 Lorem Ipsum Dolor Sit Er Elit Lamet, Consectetaur Cillium Adipisicing Pecu. Lorem Ipsum Dolor Sit Er Elit Lamet, Consectetaur Cillium Adipisicing Pecu.

11 THANKS FOR YOUR WATCHING

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