Risk-sharing and its role in manufacturer’s innovation

Figures & data

Figure 1. Conceptual diagram for manufacturer risk sharing.

Table 1. Definitions of variables.

Variable	Definition
Customer – Partnership Programs	Ordinal measure for adoption of partnership programs with customers
Supplier – Partnership Programs	Ordinal measure for adoption of partnership programs with suppliers
Customer – Supplier Certification	Ordinal measure for adoption of supplier certification for customers
Supplier – Certification	Ordinal measure for adoption of supplier certification
Customer – Single Sourcing	Ordinal measure for adoption of single sourcing with customers
Supplier – Single Sourcing	Ordinal measure for adoption of single sourcing with suppliers
Customer – Long-Term Contracts	Ordinal measure for adoption of long-term contracts with customers
Supplier – Long-Term Contracts	Ordinal measure for adoption of long-term contracts with suppliers
Customer – Concurrent Engineering	Ordinal measure for adoption of concurrent engineering with customers
Supplier – Concurrent Engineering	Ordinal measure for adoption of concurrent engineering with suppliers
Customer – Technical Assistance	Ordinal measure for adoption of technical assistance with customers
Supplier – Technical Assistance	Ordinal measure for adoption of technical assistance with suppliers
Share Equipment with Customers	Ordinal measure for adoption of equipment sharing with customers
Share Equipment with Suppliers	Ordinal measure for adoption of equipment sharing with suppliers
Share Personnel with Customers	Ordinal measure for adoption of personnel sharing with customers
Share Personnel with Suppliers	Ordinal measure for adoption of personnel sharing with suppliers
Share New Markets with Customers	Ordinal measure for adoption of new market sharing with customers
Share New Markets with Suppliers	Ordinal measure for adoption of new market sharing with suppliers
Joint Bidding with Customers	Ordinal measure for adoption of joint bidding with customers
Joint Bidding with Suppliers	Ordinal measure for adoption of joint bidding with suppliers
Joint Manufacturing with Customers	Ordinal measure for adoption of joint manufacturing with customers
Joint Manufacturing with Suppliers	Ordinal measure for adoption of joint manufacturing with suppliers
Joint Product Develop. With Customers	Ordinal measure for adoption of joint product develop. With customers
Joint Product Develop. With Suppliers	Ordinal measure for adoption of joint product develop. with suppliers
Use of CAD	Ordinal measure for adoption of CAD
Use of CAM	Ordinal measure for adoption of CAM
Use of CAE	Ordinal measure for adoption of CAE
Use of Statistical process control	Ordinal measure for adoption of statistical process control
Process Risk Sharing	Ordinal measure for adoption of process risk sharing practices
Operational Risk-Sharing	Ordinal measure for adoption of operational risk sharing practices
Asset Risk-Sharing	Ordinal measure for adoption of asset risk sharing practices
Manufact. Technology	Ordinal measure for adoption of manufacturing technology
# of Employees	Number of employees
Process Innovation	Ordinal measure for process innovation
Product Innovation	Ordinal measure for product innovation

Table 2. Rotated factor loadings for risk-sharing activities.

	ASSET RISK- SHARING	PROCESS RISK-SHARING	MANUFACT. TECHNOLOGY	OPERATIONAL RISK-SHARING
ITEM	Factor 1	Factor 2	Factor 3	Factor 4
Customer – Partnership Programs	.051	.617	−.092	.232
Supplier – Partnership Programs	.117	.614	−.150	.263
Customer – Supplier Certification	.050	.661	−.154	−.028
Supplier – Certification	.014	.639	−.251	.042
Customer – Single Sourcing	.117	.529	−.100	.050
Supplier – Single Sourcing	.098	.569	−.206	.138
Customer – Long-Term Contracts	−.077	.526	−.146	.149
Supplier – Long-Term Contracts	.080	.584	.0003	.147
Customer – Concurrent Engineering	.094	.513	−.325	.226
Supplier – Concurrent Engineering	.201	.519	−.193	.199
Customer – Technical Assistance	.078	.523	−.486	.024
Supplier – Technical Assistance	.192	.558	−.199	.158
Share Equipment with Customers	.654	−.020	−.332	.130
Share Equipment with Suppliers	.642	.025	−.133	.165
Share Personnel with Customers	.594	.086	−.190	.224
Share Personnel with Suppliers	.993	.072	−.055	.078
Share New Markets with Customers	.090	.062	−.190	.588
Share New Markets with Suppliers	.285	.176	.0003	.544
Joint Bidding with Customers	.078	−.012	−.153	.697
Joint Bidding with Suppliers	.097	.158	.121	.524
Joint Manufacturing with Customers	.284	.080	−.289	.576
Joint Manufacturing with Suppliers	.339	.333	.003	.616
Joint Product Develop. With Cust.	−.061	.244	−.305	.446
Joint Product Develop. With Suppliers	.336	.392	−.045	.448
Use of CAD	.115	.141	−.772	.045
Use of CAM	.194	.270	−.649	.060
Use of CAE	.202	.114	−.797	.163
Use of Statistical process control	−.103	.488	−.506	.002
Variance Explained (%)	0.351	0.220	0.218	0.212

Extraction Method: Maximum Likelihood; Rotation Method: Varimax.

Test of 4 vs. no factors: Chi²(112) = 1129***.

Test of 4 vs. more factors: Chi²(272) = 571.7***.

***p < 0.01.

Table 3. Descriptive statistics and correlations.

Variable	Mean	SD	Min	Max	CA^§	1	2	3	4	5
1. Process Risk-Sharing	2.54	0.82	1	4.75	0.88	1.00
2. Operational Risk-Sharing	1.56	0.61	1	4	0.81	0.49***	1.00
3. Asset Risk-Sharing	1.21	0.48	1	3.75	0.82	0.24***	0.37***	1.00
4. Manufact. Technology	2.90	1.20	1	5	0.81	0.52***	0.31***	0.31***	1.00
5. Number of Employees	4.98^†	1.29	1	9	NA	0.14	0.13	−0.001	0.14	1.00

^§CA = Cronbach alpha, ***, ** and * indicate significance levels of 1%, 5%, and 10%, respectively.

^†There were nine ‘buckets’ of firm size. Actual firm size ranged between 1 and 499, with an average of 69 employees per firm.

Table 4. Risk-sharing and technology correlations.

Table 5. Innovation regression analysis.

Variable	Process Innovation	Product Innovation
Process Risk-Sharing	0.343 (0.109)*	0.246 (0.101)*
Operational Risk-Sharing	0.130 (0.138)	−0.224 (0.122)
Asset Risk-Sharing	−0.218 (0.141)	0.056 (0.123)
Mfg. Technology	0.229 (0.050)*	0.319 (0.045)*
# of Employees	0.000 (0.001)	0.000 (0.001)
# of Observations	297	294
Pseudo R-Squared	0.140	0.185

Notes:Table contains coefficient estimates of an ordered probit regression; figures in parenthesis are standard errors; * indicates. significance levels of 1%; VIF scores range between 1.08 and 1.56 for the all the independent variables.

Table

		Slight	Mod.	Large	Very Large
	Never	Degree	Degree	Degree	Degree
	(1)	(2)	(3)	(4)	(5)
Customer – Partnership Programs	(1)	(2)	(3)	(4)	(5)
Supplier – Partnership Programs	(1)	(2)	(3)	(4)	(5)
Customer – Supplier Certification	(1)	(2)	(3)	(4)	(5)
Supplier – Certification	(1)	(2)	(3)	(4)	(5)
Customer – Single Sourcing	(1)	(2)	(3)	(4)	(5)
Supplier – Single Sourcing	(1)	(2)	(3)	(4)	(5)
Customer – Long-Term Contracts	(1)	(2)	(3)	(4)	(5)
Supplier – Long-Term Contracts	(1)	(2)	(3)	(4)	(5)
Customer – Concurrent Engineering	(1)	(2)	(3)	(4)	(5)
Supplier – Concurrent Engineering	(1)	(2)	(3)	(4)	(5)
Customer – Technical Assistance	(1)	(2)	(3)	(4)	(5)
Supplier – Technical Assistance	(1)	(2)	(3)	(4)	(5)
Share Equipment with Customers	(1)	(2)	(3)	(4)	(5)
Share Equipment with Suppliers	(1)	(2)	(3)	(4)	(5)
Share Personnel with Customers	(1)	(2)	(3)	(4)	(5)
Share Personnel with Suppliers	(1)	(2)	(3)	(4)	(5)
Share New Markets with Cust.	(1)	(2)	(3)	(4)	(5)
Share New Markets with Supp.	(1)	(2)	(3)	(4)	(5)
Joint Bidding with Customers	(1)	(2)	(3)	(4)	(5)
Joint Bidding with Suppliers	(1)	(2)	(3)	(4)	(5)
Joint Manufacturing with Cust.	(1)	(2)	(3)	(4)	(5)
Joint Manufacturing with Supp.	(1)	(2)	(3)	(4)	(5)
Joint Product Develop. With Cust.	(1)	(2)	(3)	(4)	(5)
Joint Product Develop. With Supp.	(1)	(2)	(3)	(4)	(5)
Use Computer Aided Design	(1)	(2)	(3)	(4)	(5)
Use Computer Aided Manufact.	(1)	(2)	(3)	(4)	(5)
Use Computer Aided Engineering	(1)	(2)	(3)	(4)	(5)
Use Statistical Process Control	(1)	(2)	(3)	(4)	(5)

Table

		Slight	Mod.	Large	Very Large
	Never	Degree	Degree	Degree	Degree
	(1)	(2)	(3)	(4)	(5)
Enhanced versions of existing products?	(1)	(2)	(3)	(4)	(5)
Modified production processes for new or existing products?	(1)	(2)	(3)	(4)	(5)

Source: Authors’ Telephone Survey.