The Influence of Customer Scope on Supplier Learning and Performance in the Japanese Automobile Industry
Author(s)
Nobeoka, Kentaro
Dyer, Jeffrey
Date Issued
July 18, 2002
Series/Report no.
IMVP;191a
Abstract
Most studies on Japanese supplier-automaker relationships have focused on the nature of
the dyadic inter-firm relationship and the performance of the assembler. We examine the
relationship between a Japanese supplier's "customer scope strategy" (i.e. number of
customers) and the supplier's performance. By analyzing data on 125 suppliers, we found
that a supplier with broad automotive customer scope tends to be more profitable and is
better off with less exclusive ties. This relationship held even after controlling for supplier
size, product type, and the underlying competitiveness/efficiency of each supplier. We
argue that a broad customer scope strategy Ieads to superior performance primarily due to
learning opportunities. This finding highlights a key liability of vertical integration since
integration of inputs often limits the ability of in-house divisions to access new customers.
However, there is a limit to the advantages of a broad customer base, since sales to
'unrelated customers' (e.g., non-automotive) did not have a significant impact on
performance. In short, there appear to be diminishing returns to customer scope as
suppliers add 'dissimilar' customers with requirements farther from their core knowledge
domain. Thus, these findings offer empirical support for the knowledge based view of the
firm which suggests that the efficient boundaries of firms are driven by knowledge
domains/considerations. Our findings also suggest that studies that focus only on the
advantages of long-term cooperative relationships may be misleading if interpreted to mean
that an exclusive supplier-assembler relationship is the optimal solution for the supplier.
Subjects
knowledge-based view
organizational learning
japanese supplier relations
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