Liberate or Subjugate Them? The Effect of Supplier Dependence on Buyer Innovation

ABSTRACT This study extends the current understanding of buyer–supplier relationships (BSRs) and innovation by investigating the supplier dependence—buyer innovation relationship. Drawing from resource dependence and exploration‐exploitation perspectives, we hypothesize that supplier dependence negatively affects buyer innovation performance, and that this effect is moderated by market dynamism and relationalism in BSRs. Empirically, we combine two distinctive analytical steps and data sources. First, we conduct an archival case study of five US computer firms in the 1990s when the computer industry was marked by extensive BSR and innovation activities. The case results support our main‐effect hypothesis. Second, we test our hypotheses using survey data of buyers from Germany and the US. Buyer innovation performance is operationalized by innovation productivity for the main analysis and by innovation revenue impact in the robustness check. The results converge in supporting the negative main effect of supplier dependence on buyer innovation performance, but diverge regarding the moderating effect. Specifically, market dynamism is a significant moderator concerning buyer innovation productivity, while relationalism in BSRs is a significant moderator concerning buyer innovation revenue impact. Overall, our study sheds light on the adverse roles of supplier dependence in buyer innovation and offers implications for future research and practice.