Supply chain innovation: a framework of public procurement as a demand-side innovation driver

Purpose Much of the supply chain innovation (SCI) literature has focused on innovation as driven by supply-side factors that often lead to incremental product changes. Such marginal innovation outcomes make suppliers less responsive to government buyers’ innovation needs for addressing societal challenges. Building on this observation, this article conceptualises how a demand-side innovation driver, namely public procurement, influences SCI radically and incrementally from downstream. Design/methodology/approach Employing the conceptual research approach and following established guidelines for building theory and conceptual development in management and supply chain research, we re-examine the SCI literature for existing assumptions about government innovation procurement and explain how public procurement may spur radical and incremental innovation across a supply chain. The article draws on network theory lenses to propose a framework that enhances government’s innovation-oriented procurement role in SCI. Findings Our supply chain innovation-oriented procurement (SCIP) framework explains that government buyers, through demand articulation (i.e. precise, or outcome-based), may stimulate focal suppliers’ responsiveness to generate their desired innovation – incremental or radical. While precise demand articulation often leads to incremental innovation, clear outcome-based demands favour radical innovation more as they allow for creative and alternative solutions. Radical and incremental innovation are not mutually exclusive and automatic. Their relationship with demand articulation is mediated by suppliers’ responsiveness (i.e. supply size and absorptive capacity), whose effect on innovation outcome is further moderated by network complexities. Practical implications Purchasing managers may use the proposed SCIP framework to determine the relevant demand articulation for their innovation procurements based on the nature and degree of innovation desired. Buyers will understand the crucial role of high absorptive capacity for supplier responsiveness and radical innovation even in complex supply networks. Also, buyers may better manage suppliers’ tendency to avoid innovation risks and costs associated with innovation-oriented contracts by facilitating their access to complementary innovation resources. Originality/value The article addresses a gap in the SCI literature with new insight into how innovation procurement as a demand-side innovation driver influences SCI in the context of the downstream supply chain in addressing societal problems. We also propose a SCIP framework that helps manage SCI efforts in innovation procurement.