Diffusion of Innovation and Firm Financial Performance in Buyer-Supplier Networks for ICT Outsourcing

Information and communication technology (ICT) integrates diverse innovative technologies with growing demand from downstream customer for digitalization transaction process across industries (Felipe et al., 2020). The global ICT market was valued at approximately $5.7 trillion in 2024, and is projected to reach a value of $9.7 trillion by 2033 (Business Research Insights, 2025). In this context, rapid technological advancement and innovative products and services drive more knowledge and competitive for firms. ICT sourcing has become a new way for the adopters, buying firms, to obtain innovative parts and components, and technological resources through buyer-supplier relationships. However, the diffusion of suppliers’ technological innovativeness within complex supply networks remains unclear. Grounded in the theory of transaction cost economics (TCE) in alliance with network analysis, our study develops a research model capturing ICT-related innovative resources from technology-driven suppliers to buying firms’ financial performance improvement. First, outsourcing ICT products and services with technology suppliers provides rich access to innovative knowledge and expertise for buying firm. Since suppliers’ technological innovativeness increase buying firms’ capability of seeking and processing information, such a diffusion process strengthens buying firms’ product development, cost, and overall financial performance (Sabherwal & Jeyaraj, 2015). Besides, the benefits of technology innovativeness are not always clear cut to buying firms due to the uncertainty in supplier networks. Thus, technology suppliers’ network structural centrality may affect the between interfirm exchange of innovative technologies throughout the entire buyer-supplier networks (Lavassani & Movahedi, 2021). Using financial database S&P Capital IQ, we investigate the joint effects of technological innovation diffusion and complex supplier networks by answering the research questions; (i) To what extent does the diffusion of supplier technological innovation affect buying firms’ financial performance? (ii) To what extent does suppliers’ network structural centrality influence the association between buying firms’ financial performance and the technological innovation diffusion? Our study will offer theoretical framework for empirical testing and practical insights for firms’ innovation-decision process.