Does Quality Knowledge Spillover at Shared Suppliers? An Empirical Investigation

We use a unique empirical setting to investigate the spillover of quality knowledge across supply chains and to the examine contingencies that affect such spillover. We analyze the quality performance of 191 suppliers, who utilize the same facilities to manufacture similar products for two distinct businesses: one that makes cars and the other that makes commercial vehicles. From 2006 to 2009, the car business undertook 2,121 quality improvement initiatives at these suppliers, while the commercial vehicles business did not undertake any such initiatives. We find that the quality knowledge developed through the quality improvement initiatives undertaken by the car business does not easily spill over to benefit the commercial vehicles business. Quality knowledge spills over under three conditions: (1) when quality improvement efforts are focused on organizational members, as opposed to when they focus on routines or technology; (2) when quality improvement efforts focus on the output activities of suppliers, not when they focus on the input or in-process activities; and (3) when quality knowledge is developed at suppliers with low complexity in their operations. Our results provide insights on managing quality at shared suppliers.