Bridging the innovation gap: Why organizational climate matters for leveraging innovation from supply networks

Abstract

Recent studies have provided empirical evidence that innovation performance is related to the way a firm is embedded in its supply network, specifically the centrality of its network position, but it remains unclear why some firms can use inputs from suppliers better than others, despite having comparable structural characteristics in their supply networks. Drawing on theories of social networks and organizational climate, this study examines the role of buying firms' organizational climate for innovation. It uses several structured and unstructured datasets for S&P 500 firms and applies count regression models to test hypotheses. Supply network data from FactSet were analyzed to determine the degree centrality of a buying firm. Computer-aided content analysis was used to capture the organizational climate of buying firms based on online employee reviews collected from Glassdoor. The results suggest a positive relationship between the degree centrality and the innovation performance of buying firms. Moreover, certain facets of the organizational climate related to learning, including rewards and career progress, as well as work pressure management, affect the link between the degree centrality of a buying firm and its innovation performance. In conclusion, this study enhances the understanding of the connection between supply networks and innovation. It highlights the crucial role of a firm-level factor, specifically the influential facets of organizational climate for learning, in determining innovation performance.