The impact of supplier innovation on buyer innovation and the moderating effects of geographic distance, financial interdependence and technical similarity

Purpose This study aims to examine the extent to which a buying firm can leverage the firm's supplier's innovations to boost the firm's own innovation performance and key moderators to this relationship. Grounded in social embeddedness theory, the authors explore the role of dyadic embeddedness between a buyer and supplier as a facilitator of buyer innovation. Design/methodology/approach Negative binomial regression was used to empirically analyze a large sample of dyadic observations from the USA manufacturing industry. Measures were developed from data acquired from Compustat, LexisNexis and Bloomberg. Findings The findings indicate that supplier innovation has a positive impact on a buyer firm's innovation output, particularly when the firms are technically similar and when there is a higher degree of financial interdependence in the buyer-supplier dyad. Originality/value This study provides important insights into how supplier firms can facilitate buyer innovation as and how relational factors suggested by social embeddedness theory act to strengthen this effect. Through a theoretical-based empirical examination of supply chain dyads, the findings highlight the importance of financial interdependence and technical similarity when buyers seek to benefit from supplier innovation capabilities.