The Bright Side and Dark Side of Embedded Ties in Business-to-Business Innovation

TLDR

Joint innovation projects between suppliers and customers are increasing, yet it remains unclear whether embedded ties help or hurt supplier innovation. The authors theorize that embedded ties interact with supplier and customer innovation knowledge to influence supplier innovation. In 157 Dutch B2B relationships, embedded ties reduce the benefit suppliers gain from customer innovation knowledge due to concerns about customer opportunism. However, three moderating relationship and governance features can offset these dark‑side effects and even boost innovation, while embedded ties have no effect on suppliers’ use of their own innovation knowledge.

Abstract

Although the number and importance of joint innovation projects between suppliers and their customers continue to rise, the literature has yet to resolve a key question: Do embedded ties with customers help or hurt supplier innovation? Drawing on both the tie strength and knowledge literatures, the authors theorize that embedded ties interact with supplier and customer innovation knowledge to influence supplier innovation. In a sample of 157 Dutch business-to-business innovation relationships, they observe that embedded ties weaken how much suppliers benefit from customer innovation knowledge because of worries about customer opportunism (the dark side of embedded ties). However, they uncover three moderating relationship and governance features that allow suppliers to overcome these dark-side effects and even increase innovation (the bright side of embedded ties). Finally, although the authors predicted a bright-side effect, they find that embedded ties neither help nor hinder the supplier to leverage its own innovation knowledge in the relationship.