| Today, in the manufacturing sector, suppliers are learning to shoulder larger design and development responsibilities while world-class manufacturing organizations are learning how to delegate, manage, and integrate suppliers' innovative activities. The extant literature in strategy and transaction cost economics suggests that the delegation of product development to their suppliers is fraught with problems like the inability to manage innovations in a timely fashion, increased dependence relationship on the supplier, and the loss of vertical control. The standard solution to these problems offered by the literature is some variation on the theme of vertical integration: the hierarchical control offered by in-house development or the cultural control offered by a clan or keiretsu.;We propose that these solutions are inadequate. Innovation in the modern industrial world is increasingly driven into complex continuum that lies in the mid-ground between the extremes of the open market and the vertically integrated firm. We need to construct a new economic and behavioral logic for explaining interorganizational relationships in this mid-ground. Our theory of relationalism is an alternative theoretical formulation that does a better job of explaining phenomena in the mid-ground of the continuum.;Our theory building is rooted in reality: in 1992 we began field research in thirty companies in four industries, including 12 customer-supplier dyads, in North America, Japan, and Southeast Asia that were building a range of supplier management competencies like just-in-time logistics, fast-cycle development, and product postponement. By 1994, we narrowed our focus to a select group of automotive customer-supplier pairs engaged in fast-cycle development.;These field-based case studies and a synthesis of the research literature were used to design and pilot test a questionnaire that was administered to 180 automotive suppliers. Our hypotheses testing was designed to investigate relationalism in terms of its usefulness in understanding innovation in manufacturer-supplier relationships. Our results based on 108 completed surveys (response rate 60%) support the assertion that the economic and behavioral logic of relationalism explains the innovative activities of suppliers in manufacturer-supplier relationships. |
