Supply chain risks and corporate innovation strategy: from the perspective of breakthrough innovation and incremental innovation

ABSTRACT

This paper investigates the impact of supply chain risks on corporate innovation in China. Our findings indicate that firms with high supply chain risks are more inclined towards incremental innovation rather than breakthrough innovation. This relationship is further strengthened by high customer concentration and strong financial constraints, and it is more pronounced in industries characterized by higher levels of competitiveness and within the high-tech sector. Furthermore, the influence of supply chain risks on corporate innovation is jointly driven by supply and demand risks. Crucially, strategic adjustments in response to supply chain risks not only improve operational performance but also enhance the stability of customer relationships.

KEYWORDS:

• Supply chain risks
• corporate innovation strategy
• breakthrough innovation
• incremental innovation

JEL CLASSIFICATION:

• D22
• L14
• O32

Acknowledgements

we acknowledge the Postdoctoral Science Foundation of China [No. 2023M741164] and the Fundamental Research Funds for the Central Universities of China [No. JKN02232204].

Disclosure statement

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

Supplementary material

Supplemental data for this article can be accessed online at https://doi.org/10.1080/13504851.2024.2374876.

Notes

¹ Annual reports were obtained using a Python-based web crawler from the CNINFO website, and firm-level supply chain risks were computed using textual analysis. Financial information was sourced from the CSMAR database, while patent details and citation data were extracted from the CNRDS database.

² The dependent variable (Breakthrough) encompasses various metrics for breakthrough innovation (see Appendix I for definitions), including Brethr_Portfolio and Brethr_Class. The independent variable (SCR) represents supply chain risks (see Appendix I for definitions), while the control variables (CV) include a series of factors that may influence breakthrough innovation (see Table A1-A2 in Appendix II for variable definitions and summary statistics). Additionally, we also incorporate firm and year fixed effects into the model, and cluster standard errors at firm level. To address outliers, continuous variables were winsorized at the 1% and 99% quantiles.

³ See Table A3 in Appendix II for robustness tests. All the above robustness tests align with baseline regression, affirming the robustness of the previous empirical analysis conclusions. Furthermore, to enhance credibility and address endogeneity, we conduct the endogeneity tests (see Table A4 in Appendix II). The results indicate that supply chain risks drive firms towards less breakthrough innovation after accounting for potential endogenous issues.

⁴ Columns (1)-(4) reveal that SCR exhibit significantly negative coefficients at the 1% level in firms with high CC, whereas in firms with low CC, the coefficients are significant at the 10% level. Further between-group variation tests underscore these differences, highlighting a more pronounced negative impact of SCR on innovation among firms with higher CC.

Additional information

Funding

The work was supported by the Fundamental Research Funds for the Central Universities [No. JKN02232204]; China Postdoctoral Science Foundation [No. 2023M741164].