Electronic integration and capability widening for OEM suppliers: The influence of supplier innovativeness and product modularity

• Published in: International marketing review 2020-05, Vol.37 (3), p.493-514
• Main Authors: Hsiao, Cheng-Chieh, Tan, Danchi, Chiou, Jyh-Shen
• Format: Article
• Language: English
• Subjects: Aircraft accidents & safety; Innovations; Manufacturing; Product development; Suppliers
• ISSN: 0265-1335; 1758-6763
• DOI: 10.1108/IMR-02-2018-0071

PurposeThe purpose of this paper is to investigate the effect of original equipment manufacturing (OEM) suppliers’ electronic integration with global customers on their capability widening, following the literature on electronic integration, firm innovativeness, product modularity and dynamic capabilities. It also examines the moderating roles of supplier innovativeness and product modularity in the proposed relationship.Design/methodology/approachThis study conducts empirical examination on a sample of OEM suppliers in Taiwan. It collects 201 self-reported responses via mailed surveys of 1,069 electronics companies listed in the 5000 Largest Firms in Taiwan, and the archival data are obtained from the Taiwan Economic Journal database.FindingsThe results show that electronic integration with global customers affects capability widening negatively, whereas supplier innovativeness affects capability widening positively. In addition, product modularity plays a moderating role in the relationship between electronic integration and capability widening.Research limitations/implicationsThis study contributes to the electronic integration literature by providing empirical evidences on how OEM suppliers’ electronic integration affects their capability widening. This study also adds to the supply chain management literature by demonstrating the relationship between OEM suppliers’ innovativeness and their move into higher value-added activities, as well as how product modularity interplays with electronic integration between customers and suppliers on suppliers’ capability widening in global supplier‒customer relationships.Practical implicationsFor OEM suppliers with a low level of product modularity, they may widen their capabilities by exploring other value-added activities (e.g. original design manufacturing or original brand manufacturing). For OEM suppliers with a high level of product modularity, the improvement of their manufacturing capabilities is a helpful approach to create competitive advantage.Originality/valueThis study is one of the first to examine the interplay between electronic integration and product modularity on capability widening of OEM suppliers from an emerging market. Meanwhile, this study provides support for the relationship between supplier innovativeness and innovative activities in the global supply chain context.