Supply chain disruption risk: an unintended consequence of product innovation

Abstract

Growth is one of the more important strategic priorities for top managers today and product innovation is a necessary strategy for achieving that goal. While product innovation is beneficial and necessary, it also introduces greater complexity and uncertainty in a firm’s operations. We focus in this study on an untested negative consequence of product innovation-induced complexity and uncertainty–namely, increased supply chain disruption risk. Using data from multiple sources that combines product innovation-related data from firm websites, patent services websites and key informant interview data for 164 firms, we empirically show that greater product innovation activity is associated with greater supplier dependence and increased product variety which, in turn, increase the supply chain disruption risk faced by firms. We also examine if a firm’s central position in the supply network mitigates the disruption risk it faces because of greater supplier dependence. Similarly, we examine if external knowledge utilisation mitigates the disruption risk faced by the firm because of greater product variety.