Supply chain disruption risk: an unintended consequence of product innovation

Abstract

Growth is one of the more important strategic priorities for top managers today and product innovation is a necessary strategy for achieving that goal. While product innovation is beneficial and necessary, it also introduces greater complexity and uncertainty in a firm’s operations. We focus in this study on an untested negative consequence of product innovation-induced complexity and uncertainty – namely, increased supply chain disruption risk. Using data from multiple sources that combines product innovation-related data from firm websites, patent services websites and key informant interview data for 164 firms, we empirically show that greater product innovation activity is associated with greater supplier dependence and increased product variety which, in turn, increase the supply chain disruption risk faced by firms. We also examine if a firm’s central position in the supply network mitigates the disruption risk it faces because of greater supplier dependence. Similarly, we examine if external knowledge utilisation mitigates the disruption risk faced by the firm because of greater product variety.

KEYWORDS:

• Product innovation
• supply chain management
• supply chain disruptions
• supplier dependence
• network centrality
• external knowledge utilisation

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

The data that support the findings of this study are available from the corresponding author upon reasonable request.

Notes

1 This interview is one of the five recent interviews that we conducted with top supply chain executives from food and beverages, computer manufacturing, management consulting, personal care products and biomedical devices firms.

2 Supply chain disruption risk captures the probabilistic risk assessment (likelihood of occurrence * potential impact) of the interruptions in the physical flow of goods in the supply chain.

3 The product innovation and product variety metrics for the study were gathered from secondary sources. The remaining constructs of interest in the model are related to the supply chain. We therefore determined that a supply chain representative is likely to be more appropriate as a key informant.

4 We thank an anonymous reviewer for suggesting this.

Additional information

Notes on contributors

Saurabh Ambulkar

Saurabh Ambulkar is an Assistant Professor in Business Analytics and Operations Management at University of Dayton. His research focus is on recovering from supply chain disruptions and building resilience in supply chains.

Sridhar Ramaswami

Sridhar Ramaswami is the Dapper Professor of Marketing at the Ivy College of Business at Iowa State University. Dr. Ramaswami primarily works in the area of marketing strategy. His current research areas include customer relationship and experience management (CRM/CEM), marketing's contribution to firm value, marketing-supply chain interface, and marketing capabilities and innovation. Dr. Ramaswami's research has appeared in several leading marketing and business journals such as Journal of Marketing, Journal of Consumer Psychology, Journal of International Business Studies, Journal of the Academy of Marketing Sciences, Journal of Business Research, International Journal of Research in Marketing, and Marketing Letters. His work with Dr. Agarwal won the ‘JIBS Decade Award’ honouring the most influential article from the 1992 volume of the Journal of International Business Studies. His paper in the Journal of the Academy of Marketing Sciences won the Best Paper Award for the year 2009. Dr. Ramaswami has recently focused his attention on understanding the synergy between marketing and supply chain functions of organisations.

Jennifer Blackhurst

Jennifer Blackhurst is the Associate Dean for Graduate Programs and the Leonard A. Hadley Professor of Business Analytics in Tippie College of Business. In her role as Associate Dean, she leads the efforts of the development and innovation of graduate education programmes in the Tippie College. Blackhurst received her doctorate in Industrial Engineering from the University of Iowa in 2002. Her research is focused in the areas of supply chain risk and disruption management; supplier assessment and selection; and supply chain design and coordination.

M. Johnny Rungtusanatham

M. Rungtusanatham is Canada Research Chair in Supply Chain Management at the Schulich School of Business, York University; a 2017 Fellow inductee of the Decision Sciences Institute, and an awards-winning researcher and educator. He is considered one of the top-50 authors of operations management research and of supply chain management research and one of the top contributors to the field of Operations Management, according to published sources. His research is supported by grants totalling more than US$295,000 and CAD$1,400,000, with his 55 + publications related to quality management, mass customisation, and supply chain disruptions and relationships having appeared in top academic and business journals. His current research focuses on attributes, triggering events, performance consequences, and mitigation of supply disruptions. Rungtusanatham has also co-authored two introductory operations management textbooks and five teaching cases.