Types of embedded ties in buyer-supplier relationships and their combined effects on innovation performance

This paper aims to analyze the impact of three types of embedded ties, namely, specialized complementary resources, idiosyncratic investments and knowledge sharing, on the innovation capacity of firms. It also examines the particularities of the machine-tool industry.

The evaluation of the embedded buyer-supplier ties is based on the potential sources of relational rents proposed by Dyer and Singh (1998). It also draws on Uzzi and Lancaster (2003) and Noordhoff et al. (2011), among others, to discuss the positive and negative aspects of embedded ties. Using data from a survey of 202 European machine-tool firms acting as buyers and sellers, the study proposes and evaluates a structural equation model.

Only knowledge-sharing routines exert a significant positive effect on product innovation performance. Neither an increase in idiosyncratic investments nor in complementary resources and capabilities enhances innovation performance. Moreover, knowledge-sharing routines mediate in the effect of idiosyncratic investments on innovation performance.

The machine-tool industry has unique characteristics that make generalization difficult. There is also considerable difficulty associated with testing the interrelations among these embedded ties in greater depth in the long run. It is plausible to consider that these interrelations operate within a gradual process.

This research contributes to a better understanding of the role of embedded ties on innovativeness. To the best of the authors’ knowledge, no previous international empirical research has been published analyzing the mediation effects among specialized complementary resources, idiosyncratic investments and knowledge sharing, and their effects on the innovation capacity of firms.