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Collaborative innovation in supply chain systems: Value creation and leadership structure

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  • Shen, Bin
  • Xu, Xiaoyan
  • Chan, Hau Ling
  • Choi, Tsan-Ming

Abstract

In the information age, collaborative innovation in process and product is critically important. In this paper, we study the value of a supply chain innovation in which one upstream supplier and one downstream manufacturer may co-develop a product that includes several innovative elements. The supplier is responsible for process innovation to optimise the production system and reduce unit production costs, and the manufacturer is responsible for product innovation. We study innovation leadership and consider the supplier-led (SL) and manufacturer-led (ML) innovation games. We find that in both SL and ML innovation games, if the manufacturer has sufficient resources and capability to invest in product innovation, the manufacturer is always willing to invest in product innovation, but not the supplier. We identify the value of co-innovation and innovation leadership. We find that the product with higher innovation level will be provided under the ML innovation game. When selling the technological and innovative products (as they usually have a larger profit margin ratio), the manufacturer should invest more in product innovation. When product innovation efficiency is large (small), the manufacturer's profit is convex (concave) in the profit margin ratio. We identify the optimal value creation of joint pricing and innovation in a supply chain and the impacts of “process-product innovation dependence”. Our results (i) highlight the value of manufacturer-led innovation and the importance of considering the product's profit margin ratio in co-innovation, (ii) indicate that the manufacturer should be the leader to invest in product innovation, and (iii) the co-innovated products should be sold at a high profit margin.

Suggested Citation

  • Shen, Bin & Xu, Xiaoyan & Chan, Hau Ling & Choi, Tsan-Ming, 2021. "Collaborative innovation in supply chain systems: Value creation and leadership structure," International Journal of Production Economics, Elsevier, vol. 235(C).
    • Handle: RePEc:eee:proeco:v:235:y:2021:i:c:s092552732100044x
    DOI: 10.1016/j.ijpe.2021.108068
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    2. Peng, Hui & Lu, Yaobin & Gupta, Sumeet, 2023. "Promoting value emergence through digital platform ecosystems: Perspectives on resource integration in China," Technological Forecasting and Social Change, Elsevier, vol. 189(C).
    3. Zahoor, Nadia & Khan, Zaheer & Wu, Jie & Tarba, Shlomo Y. & Donbesuur, Francis & Khan, Huda, 2023. "Vertical alliances and innovation: A systematic review of the literature and a future research agenda," Technovation, Elsevier, vol. 122(C).
    4. Yaxin Wang & Haoyu Wen & ZhongQuan Hu & Yuntao Zhang, 2023. "Collaborative Innovation Strategy of Supply Chain in the Context of MCU Domestic Substitution : A Differential Game Analysis," Computational Economics, Springer;Society for Computational Economics, vol. 61(3), pages 1039-1074, March.
    5. Wei Feng & Ling Zhao & Yue Chen, 2022. "Research on Collaborative Innovation Mode of Enterprise Group from the Perspective of Comprehensive Innovation Management," Sustainability, MDPI, vol. 14(9), pages 1-19, April.
    6. Sima Sabahi & Mahour M. Parast, 2023. "An operations and supply chain management perspective to product innovation," Operations Management Research, Springer, vol. 16(2), pages 808-829, June.
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    9. Phuong Thi Minh Nguyen & Khuong Ngoc Mai & Phuong Ngoc Duy Nguyen, 2023. "Does Trust Affect Antecedents of Inter-Organizational Governance Mechanisms and Elicit Successful Collaboration via Innovation? An Empirical Study from a Market-Oriented Economy in Vietnam," Sustainability, MDPI, vol. 15(12), pages 1-27, June.
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