Concentration and diversification: components suppliers’ strategy in utilising external knowledge

Abstract

Automakers are an important knowledge source for components suppliers. Concentration on automakers for knowledge can enhance suppliers’ innovation quality. However, diversification of external knowledge sources has also been emphasised. This paper discusses the effects of concentration and diversification of external knowledge sources on suppliers’ innovation quality. Using U.S. vehicle components suppliers as a sample, the empirical result shows concentration is curvilinearly related to suppliers’ innovation quality. More importantly, this study reveals that integrating broad sources of knowledge can enhance the efficiency with which suppliers utilise automakers’ knowledge. This study contributes to the investigation into the influence of the distribution of external sources of knowledge on the firm’s innovation performance. The study also contributes to the understanding of sources of innovation and knowledge transfer in value chains.