Effect of supply chain structure and power dynamics on R&D and market performances

Abstract

This study is the first investigating the effect of supply chain structure and players’ power dynamics on a supply chain’s R&D and market performances. We consider a three-stage supply chain, consisting of a R&D firm, a manufacturer, and a seller. We develop six supply chain models based on various structures and power dynamics, and reveal important implications by comparing the models. R&D performance is a function of supply chain structure; an integrated supply chain can expect improved performance. The selling price is a function of power dynamics, and is higher when R&D has bargaining power. Market and profit performances are higher in an integrated, manufacturer-led supply chain. The manufacturer’s role must be revisited; due to its location in the middle of the supply chain, the manufacturer can directly control the overall chain. On the other hand, a R&D firm could innately be associated with marginalization issues. Therefore, it is important for the R&D firm to have a systematic understanding of the entire system. This study contributes to the literature and practice by not only bridging the gap in the previous studies but also offering important managerial implications.

Keyword : R&D, supply chain structure, power dynamics, product quality, pricing, principal-agent paradigm