Product innovation and knowledge protection in the relationshipbetween automotive first-tier suppliers and OEMs in China: an empiricalinvestigation

Abstract

The entry of China into the globalized world and onto the stage of the global automarket has presented auto manufacturers with the largest ever market opportunity.While global competitive forces drive firms to develop product innovation throughtheir global supply chains, the approach of global auto manufacturers and their firsttiersuppliers has been to bring existing technology into China. Only recently has thesupply chain in China become integrated into the global product innovation cycle.While innovations generated by supply channel relationships, as opposed to individualpartners, are playing an increasingly important role in the success of all supply chainpartners, there has been limited research in the literature on how supply chainrelationships cultivate the process of such innovation generation, particularly inChina.Correspondingly, this study explores how multinational suppliers can developadaptive product innovation in order to create a sustainable competitive advantage inChina and how the protection of their knowledge helps them sustain it. Drawing onthe knowledge-based view and transaction cost economics, and integrating those withbehavioural governance and the institution-based view this study identifies drivers ofproduct innovation for MNC suppliers in their relationships with Chinese OEMs,investigates the influence of supplier involvement and knowledge protection onsupplier product innovation and examines the outcomes in the specific context of theChinese automotive industry from the first-tier supplier perspective. Survey results of170 multinational automobile suppliers in China indicate support for most of thehypotheses.Specifically, knowledge protection is found to have an impact on product innovationin the context of the auto industry in China. Supplier involvement in co-design andco-development with an automotive OEM customer has an inverted U-shapedrelationship with product innovation. Furthermore, trust and technological uncertaintyare found to drive greater product innovation. In addition, the institutionalenvironment moderates the effect of product innovation on performance.Overall, this study enhances the understanding of how MNC suppliers can acquirelocal knowledge, develop products adapted to the local market requirements andfoster product innovation while retaining their knowledge and know-how andminimizing negative effects of spill-overs to the local competition in the automotiveindustry in China.

Date of Award	1 Aug 2013
Original language	English
Awarding Institution	The University of Manchester
Supervisor	Rudolf R. Sinkovics (Supervisor) & Mohammad Yamin (Supervisor)