Examining the effect of a firm’s supply chain network power on innovation: Being a broker or a gossiper

Abstract

Innovation is the intrinsic driver of a firm's sustainable development and success. This study investigates an approach to improve firm innovation from a supply chain network perspective. We collected data from 2002 to 2021 for Chinese listed firms and found that the higher a firm's supply chain network power, measured by a higher PageRank value, the more enhanced its innovation capability. This effect is moderated by relationship complexity (e.g., connection properties of firms within the same network) and operational complexity (e.g., size difference across networks). In terms of relationship complexity properties, we find that betweenness centrality and closeness centrality have opposite effects. A firm's betweenness centrality enhances the impact of the firm's supply chain network power on innovation, whereas the closeness centrality of a firm diminishes the relationship between the firm's supply chain network power and innovation. Regarding operational complexity properties, the effect of a firm's supply chain network power on its innovation will be more significant in a larger network. The findings of this study encourage firms to improve their innovation capabilities by enhancing their influence over and position within the supply chain network, especially when the network is large and complex. More importantly, firms should play the role of brokers, rather than gossipers, in supply chain networks to better utilize their power.