Which Supplier to Select for Product Development? A Node, Dyad, and Network Level Investigation

Despite of the increasing trend of distributed product development in innovation, little is known about the factors that drive supplier selection decisions when developing a new product. Further, extant studies typically incorporate factors at only one level of analysis, failing to consider a rich, multilevel set of predictors. Addressing this, we empirically investigate the influences of three factors on product-level supplier selections: (1) supplier historical product performance (node-level), (2) buyer-supplier geographic and language difference (dyad-level) and (3) buyer-supplier structural equivalence (network-level). Analyzing a directional, longitudinal product development network dataset in the Electronic Video Game (EVG) industry, we show that a game developer with lower publisher-specific game performance, greater geographic distance, different primary language from the publisher, and a less structurally equivalent position with the game publisher, is less likely to be chosen for the development of a new game. Comparative analysis further shows that, out of the three predictors, structural equivalence has the dominant influence on the final selection. These results show the importance of going beyond node- and dyad-level factors to consider a supplier’s relative network position when making supplier selection decisions for innovation activities.