The effects of inter-industry and country differences in supplier relationships on pioneering innovations

Innovations are critical driving forces for firms to engage in corporate growth and new business development. Innovating firms are increasingly generating new knowledge in collaboration with partners. In this paper, we analyze how the knowledge differences between the innovating firms and their suppliers in Canada are likely to result in pioneering innovations. The knowledge difference is decomposed into two dimensions: the inter-industrial dimension and the geographic dimension in national context. Using the Canadian Innovation database, we found the inter-industry difference has a positive effect and the country difference has a negative effect on the likelihood of generating pioneering innovation. The findings of this paper suggest that for generating pioneering innovation, it is important not only to search for suppliers from different industries to get access to various complementary external knowledge sources but also to find suppliers from the same or nearby countries for the sake of communication and coordination.