Second-Order Between-Supplier Learning

Abstract

Substantial empirical evidence shows that suppliers in emerging economies can enhance their technological capabilities through direct learning from technologically advanced foreign competitors. However, suppliers in emerging markets may struggle to learn directly from knowledge about competitors’ products that are not widely available on the consumer market. We draw on insights from existing literature, explorative interviews, and anecdotal evidence to hypothesize that firms may resort to indirect learning channels by leveraging downstream customers as knowledge conduits. Using the Chinese manufacturing industry's import data from 2001 to 2015, our quantitative study reveals the innovation premium of such an indirect learning channel that we term as ‘second-order between-supplier learning’: suppliers’ technological capabilities improve significantly when they supply to domestic customers who have imported from their technologically more advanced foreign competitors. Through a qualitative study, we develop a theoretical framework to account for the mechanisms underlying this indirect learning channel, outlining the motivations, contents, and contingencies that shape the effectiveness of second-order between-supplier learning. Our findings contribute to supply chain management and organizational learning literature by building a theory of second-order between-supplier learning. Our findings could also inform suppliers in emerging markets about technological development and guide policymakers on cross-border supply chain management.