Managing the dependency of focal firms on innovative suppliers: A qualitative study of automotive manufacturers in South Africa

Abstract

Supply chain innovation (SCI) has been cited as a key source of competitive advantage. Previous studies have focused on the role of suppliers as a valuable source of innovation. OEMs (Original Equipment Manufacturers) are constantly faced with dramatic changes and the need to constantly innovate. Literature has investigated how focal firm’s innovation requirements are passed on to suppliers. Dependency on suppliers for SCI, however, is less understood. This study explored how firms manage dependency on suppliers for SCI. The qualitative study consisted of 10 semi-structured interviews with OEMs operating in South Africa. Employing resource dependency theory (RDT), relational view (RV) and absorptive capacity (AC), the study outlines strategies to manage dependency on suppliers. Three main strategies were explored, namely, building internal capability by promoting innovation internally, long-term relationships with suppliers and the influence of absorptive capacity and learning in reducing dependency on suppliers for SCI. Findings show that firms employ these strategies in isolation while highlighting the potential for an integrated approach. The study suggests ways in which firms can continue to work with their suppliers and still unlock benefits that reduce their dependency on suppliers.