Supplier involvement in component design: A study of the United States and Japan automotive industries.

Abstract

While studies on U.S. and Japanese component outsourcing policies have been published in both the academic and trade literature, the outsourcing of design work has been relatively neglected. Design outsourcing is distinct from component outsourcing due to a design's intangible nature, difficulty of appraisal and monitoring of supplier performance, level of uncertainty, diffusion risk of core technologies, and intellectual property implications. Using a combination of findings pertaining to component make-or-buy decisions from transaction cost economics, agency theory, game theory, and the Japanese buyer-supplier partnership--or relational contracting--model, two sets of contrasting predictions are identified--one from a traditional economics viewpoint and the other from a relational contracting perspective. The data assess the relative predictive power of these two perspectives. The extent of supplier involvement in design work is explored as a continuum, allowing for varying degrees of joint design work between the buyer and supplier to be explored. The hypotheses are tested on mail survey data from about 300 automotive component suppliers with product design capability in the U.S. and Japan. The study attempts to understand factors leading to varying levels of supplier involvement in design and its outcomes--and how these may differ--in the two countries. From the descriptive results of the study, one can infer that the Japanese companies are not that far ahead in supplier involvement. In fact, the U.S. companies show no significant differences from their Japanese counterparts in the facets of supplier involvement studied in this research. In addition, the U.S. suppliers are remarkably similar to the Japanese suppliers in a variety of technical and performance-related aspects. In-house technical capabilities of the suppliers and the technological uncertainty of the component turn out to be the two dominant predictors of supplier involvement. The findings provide support for the relational contracting model of buyer-supplier relations; therefore, in the case of design outsourcing, criteria such as innovativeness, quality, technical superiority of the design could possibly overshadow transaction cost considerations. Supplier involvement in design work is also found to have positive relationships with selected performance outcome measures.Ph.D.Applied SciencesIndustrial engineeringManagementSocial SciencesUniversity of Michigan, Horace H. Rackham School of Graduate Studieshttp://deepblue.lib.umich.edu/bitstream/2027.42/129576/2/9527765.pd