Antecedents and consequences of supply network enabled innovation: Evidence from Toyota

There is growing agreement among scholars that supply networks play an important role for the innovative performance of firms. We focus on supplier-supplier innovations as a less investigated outcome that occur when two organizations within the supply network decide to co- develop an innovative new product. Using data from the Toyota supply network together with econometric analysis, we show that supply network centrality can have specific advantages for firms as it is positively connected to supplier-supplier innovation. In addition, we show that supplier-supplier innovations create value for other network members, as they are positively related to backward and forward patent citations within the supply network, and the patent citations made by the focal organization (Toyota). Our results also reveal that structural and relational embeddedness in a supply network do not always work in complementary ways, and can have opposing effects on the number and value of supplier-supplier innovations in the network. Our study contributes to theory on supply network enabled innovation by exploring how the structural and relational embeddedness of a supply network influences the occurrence of supplier-supplier innovations and their value to different stakeholders.