Open innovation through supplier management - An approach to leverage the innovation potential for financial service companies

Abstract

A growing body of literature recognises that suppliers are an important knowledge source for companies to innovate. Partnering with suppliers seems logical, since uncertainty and the costs for developing innovations are reduced, whereby financial returns are increased. Most open innovation (OI) studies focus on high-tech industries, whereas industrial service sectors, like the financial service industry, receive less attention, and studies are limited in scope and underdeveloped. This research aimed to unlock this potential by creating a framework that is practical, economically feasible, and applicable for traditional financial service companies. This study employed an explanatory sequential mixed-methods design, combining quantitative (N = 356) and qualitative (N = 25) data while the depth of insight primarily stems from the qualitative data. By random sampling, the research used the results of an online questionnaire to test the developed hypotheses and to challenge the conceptual model. This was followed by a thematic analysis of expert interviews. These interviews comprised purposively sampled managers from traditional financial service companies as well as suppliers offering their service to traditional financial service companies to gain insights into how suppliers and supplier management promote OI sustainably. A model newly created by the author, ECON, was used to structure tasks in companies according to their levels of uncertainty and diversity.

Like OI, this study focussed on novel tasks with diverse teams and uncertain outcomes. The quantitative findings suggest five important elements regarding OI with new suppliers: (i) Soft skills of the suppliers are important; (ii) It is essential to have one’s autonomous decision-making power for supplier selection; (iii) Drawing on the marketing departments’ expertise is crucial, since it is already working with novel tasks; (iv) Companies concentrating on novel tasks have an increased profitability; (v) Novel tasks are mainly solved by small companies. The qualitative findings revealed the following themes throughout the datasets: (i) networks, (ii) value management, (iii) empowerment and (iv) proactiveness. Interestingly, only a minority of interviewees responded to the fifth theme, customer-centricity. This result is somewhat counterintuitive and suggests a blind spot in the respondents’ perspectives.

The findings shed new light on the potential contribution of OI with new suppliers for the financial service industry and, thus, open a new stream of research which contributes to the originality of this study. The research highlights the importance of supplier management as an instrument for OI for traditional financial service companies. It offers a new, practically created framework, the Framework of OI with suppliers for financial service companies, which traditional financial service companies can use to increase the innovation potential of new suppliers through OI in a systematic manner. In addition, the research highlights limitations that might have impacted the findings while offering numerous insights into potential directions for future studies including practical prospects for professional development.

Date of Award	24 Oct 2024
Original language	English
Awarding Institution	Northumbria University
Supervisor	Alireza Shokri (Supervisor) & Sadaat Yawar (Supervisor)