Could the double-edged nature of innovation partnership with suppliers invoke the “other sides” of trust and interdependence?

Abstract

While developing innovation partnerships with suppliers could be of immense help to firms in achieving their innovation goals, such partnerships could have a double-edged effect as they could also result in opportunistic imitation and learning races among the partners. Accordingly, it is important to understand the factors that drive the development of innovation partnerships with suppliers. In this study, we consider the effect of congruence and incongruence of two such mechanisms – trust and interdependence. We also study the contingent role of bargaining power and relationship length. We test the hypotheses using polynomial regression in conjunction with the response surface methodology. Our results suggest that the double-edged nature of innovation partnership overshadows the broadly proclaimed positive side of trust and the negative side of interdependence. Additionally, when looking closely at the contingent effect of bargaining power and relationship length, the effects of congruence and incongruence in trust and interdependence seem quite intriguing. In the case of higher bargaining power as well as longer relationships, the congruence between trust and interdependence seems to be most conducive for innovation partnerships. Interestingly, while the positive effects of interdependence diminish whenever bargaining power is high, the dark side of trust is no longer an issue in the case of longer relationships.