“Black‐box” and “gray‐box” supplier integration in product development: Antecedents, consequences and the moderating role of firm size

Abstract

We investigate here antecedents and consequences of supplier integration (black-box and gray-box) in product development activities. Antecedents include embeddedness with suppliers, supply base rationalization, and supplier selection based on product development capabilities. Product innovation and quality are modeled as returns of supplier integration in product development. We also assess the moderating role that firm size may play in the relationships we posit. Our research framework relies primarily on the social network perspective (SNP) and using a sample of 157 firms we found support for many of the posited hypotheses. Specifically, we found that embeddedness with suppliers is positively related to supply base rationalization and supplier selection based on product development capabilities. Supply base rationalization has a significant positive impact on gray-box integration (i.e., suppliers working along side the customer's engineers for product development) but not black-box integration (i.e., suppliers carry out on their own the development of components or parts for the customers). On the other hand, selecting suppliers based on their product development capabilities leads to higher levels of both gray-box and black-box integration. Only gray-box integration manifests statistically significant positive effects towards product innovation. The effects of black-box integration are negligible. Product innovation exhibits strong positive effects on quality. We also found partial support for the moderating impact of firm size. Supply base rationalization practiced by small firms has a statistically significant negative impact on black-box integration but there is no statistically significant effect for large firms. Supply base rationalization is statistically related to gray-box integration only for large firms. Finally, the positive effects of product innovation on quality are more potent for large firms. #

Supply chain integration framework using literature review

“…For example, Bagchi et al (2005a) analyse the relative degree of the involvement of key suppliers and customers in decision making in new product development, inventory management, procurement, production and distribution. Ragatz et al (1997) and Koufteros et al (2007) investigate the consequences of supplier integration in product development activities. The previous approaches on SCI are not exclusive.…”

Supplier traits for better customer firm innovation performance

“…In order to create germane items for a homophily scale, Rogers and Bhowmik (1971, p. 531) advocate considering the "relevant variables" which in turn depend on the parties involved on both sides of the dyad (in our case business firms) and the situation (in our case an innovation context). Since innovative activities within a supplier-customer relationship involve significant risks and resources on both sides (e.g., Goffin, Lemke, and Szwejczewski, 2006;Koufteros, Cheng, and Lai, 2007) and require goal and task alignment, in addition to coordination on the organizational and project levels (e.g., Gerwin and Barrowman, 2002;Wagner and Hoegl, 2006), we created a five-item formative scale to measure suppliercustomer homophily. The supplier respondents rated their similarity (Palmatier, Dant, Grewal, and Evans, 2006) with the customer firm along five dimensions: strategic orientation, innovativeness, risk taking, and interfirm partnering.…”

“…Customer firms can benefit from involving suppliers in new product development (NPD) activities rather than working independently when it comes to NPD targets, such as product innovativeness, time-to-market of new products, product quality, product cost, or development time and development cost. Furthermore, such a strategy can help firms conserve resources, share risks, gain new competencies, and move faster into new markets (e.g., Clark, 1989;Dröge, Jayaram, and Vickery, 2000;Koufteros, Cheng, and Lai, 2007;Petersen, Handfield, and Ragatz, 2005;Takeishi, 2001).…”

“…When the development of components is divided between the focal firm and various suppliers, the innovation processes and projects must be highly intertwined (Schrader and Göpfert, 1997;Von Hippel, 1990). Therefore, several researchers have recommended that supplier-customer interaction strategies in NPD are contingent on the architecture of the product and the design and development interfaces with suppliers, ranging from "none" and "white box" to "gray box" and "black box" supplier integration (Koufteros, Cheng, and Lai, 2007) or from "traditional" and "advanced" to "black box" and "integrated" subcontracting (Sobrero and Roberts, 2001). The technical difficulty of the NPD project brings us to the challenges in the supplier-customer relationship.…”

Power assessment as a high-level partner selection criterion for new product development projects

“…In this respect, some authors revealed that the suppliers must be selected according to more realistic criteria (Wasti and Liker 1997, Peterson et al 2005, Koufteros et al 2007, Song and Benedetto 2008, LaBahn, 2000and Johnsen 2009). …”