Purchasing Capabilities for Supplier Innovation in New Product Development

Getting innovation out of suppliers requires the internal absorption of supplier knowledge. Few studies have analyzed the role of the purchasing function for realizing this innovation potential. The purpose of the paper is to explore the effect of purchasing capabilities on supplier innovation in relation to different supplier product categories, taking into account innovation performance as a strategic priority moderating the relationship. The results of the paper are based on the international purchasing survey (IPS) and confirm that purchasing capabilities are important for realizing supplier innovation. For strategic products, the effect of purchasing capabilities is leveraged when the firm focuses strategically on innovation. In contrast, for bottleneck and routine products, purchasing capabilities are leveraged when there is a low focus on innovation in the firm. Consequently, firms need to prepare purchasing with the right capabilities to ensure their contribution to the innovation process and the external integration with suppliers. Introduction The importance of suppliers as a source of complementary knowledge in new product development (NPD) is widely acknowledged in the literature (Appleyard, 2003, Beecham and Cordey-Hayes, 1998, Lau et al., 2010). Supplier collaboration can have a positive effect on product innovation (Un et al., 2010), but also involves difficulties related to coordination (Fliess and Becker, 2006). Consequently, in order to facilitate the integration of knowledge, supplier collaboration also requires internal capabilities. Internal integration and coordination has been found to be important for effective integration with suppliers (Koufteros et al., 2005, Koufteros et al., 2010, Takeishi, 2001). Here the purchasing function plays an important role in managing the suppliers and supporting the R&D function (Wynstra et al., 2003). Following the knowledge-based view of the firm, the existence of some degree of cognitive overlap is important for making effective use of complementary knowledge. This implies that, in order to benefit from supplier innovation, the purchasing capabilities must be stretched to include these capabilities related to NPD. The concept of absorptive capability has been mentioned as a key to use existing internal knowledge for assimilating and utilizing external knowledge (Tsai, 2009). Tsai (2009) finds that absorptive capacity positively moderates the impact of supplier collaboration on performance in completely new or significantly improved products. In fact, thanks to the collaborative knowledge-sharing processes, new innovative ideas or solutions for product designs are generated. Despite the great interest for incorporating external knowledge, there are surprisingly few studies that have specifically analyzed the role of the purchasing function for realizing an innovation potential. It is reasonable to assume that the skills of the purchasing function significantly affect the possibilities to find and include innovative suppliers, which in turn would promote innovation performance