Improving Supplier Performance in New Product Development: The Role of Supplier Development

Suppliers play an increasingly central role in helping firms achieve their new product development (NPD) goals. Although much attention has focused on managing the buyer-supplier interface, we know little about how firms can enhance a supplier’s ability to contribute to an NPD effort. Thus, we propose a theoretical model that conceptualizes supplier development activities within inter-organizational NPD projects as bilateral knowledge-sharing processes. Antecedents (supplier responsibility, skills similarity, and single sourcing strategy) and consequences of supplier development activities (on supplier, product and project performance) are examined using a sample of 153 inter-organizational NPD projects conducted within UK manufacturers. We find broad support for our hypotheses. In particular, we show that the relational rents, in the form of improved product and project performance, attained from supplier development activities in new product development are not achieved directly, but rather indirectly via improvements in the supplier’s creative and technological capabilities. Our results emphasize the importance of adopting a strategic view of the potential returns available from investing in the NPD capabilities of key suppliers, and provide clues about underlying reasons for the suboptimal experiences of many firms’ collaborative NPD projects.