Innovative Leading Role of Chain Masters Along the Supply Chain

This article examines how Chain Masters drive supply chain innovation. We argue that Chain Masters internalize innovation externalities through governance and resource channels, thereby mitigating vertical partners’ agency conflicts and resource constraints. Findings show that: (i) Chain Masters’ innovation significantly increases vertical partners’ innovation. (ii) Chain Masters play an innovative leading role in the supply chain through improving internal control quality, alleviating financial constraints, and increasing innovation efficiency. (iii) This leadership effect is weaker when Chain Masters are located upstream. Moreover, Chain Masters’ innovation increases vertical partners’ total factor productivity by encouraging incremental innovation.