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Logistics innovation: A literature-based conceptual framework

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DOI: 10.1108/09574090911002823

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The International Journal of Logistics Management
Emerald Article: Logistics innovation: a literature-based conceptual
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Scott J. Grawe

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IJLM
20,3 Logistics innovation:
a literature-based conceptual
framework
360
Scott J. Grawe
Division of Marketing and Supply Chain Management,
Michael F. Price College of Business, The University of Oklahoma,
Norman, Oklahoma, USA

Abstract
Purpose – The purpose of this paper is to develop a model of logistics innovation based on previous
studies in the logistics literature and recommend opportunities for further research.
Design/methodology/approach – A review of the following logistics journals is conducted:
International Journal of Logistics Management, International Journal of Physical Distribution &
Logistics Management, Journal of Business Logistics, Transportation Journal, and Transportation
Research: Part E. Articles for the review are selected based on their explicit relevance to logistics
innovation.
Findings – There has been a limited amount of theory-based research conducted on the topic of
logistics innovation. While antecedents and outcomes of logistics innovation have been identified
within the leading logistics journals, very little empirical testing has been done. The diffusion of
logistics innovations has also received attention in the logistics literature.
Research limitations/implications – The scope of this paper is limited to top logistics journals.
Further, theoretical development in the study of logistics innovation is warranted.
Originality/value – Few studies have specifically addressed logistics innovation. The paper offers a
model of logistics innovation based on a review of the existing literature.
Keywords Innovation, Distribution management, Resource management
Paper type Literature review

1. Introduction
The world is getting smaller. Firms are sourcing raw materials and finished goods
from the other side of the globe and distributing product to countries once thought to
be beyond reach. How did we get to this point? What allows a firm to move product
around the globe with enough reliability and predictability to keep plants operating
and product on retail shelves? While there are several factors that can help explain
this, the fact that business practices have changed over time is evident. Many
changes have been subtle, but some, more innovative changes have directly impacted
entire industries. One such example is the use of containers for shipping goods
internationally.
In 1956, Malcom McLean shipped 58 aluminum truck bodies in frames on a ship
from Newark to Houston, marking the introduction of containerization for moving
The International Journal of Logistics cargo on the seas (Levinson, 2006). Prior to that time, cargo was loaded into crates for
Management shipping overseas requiring significant time and labor to load and unload each ship.
Vol. 20 No. 3, 2009
pp. 360-377 McLean’s new method of shipping cargo caught on quickly. Soon, ports all over the
q Emerald Group Publishing Limited world were designed to handle the new containers. Containerization allowed firms to
0957-4093
DOI 10.1108/09574090911002823 dramatically reduce transportation costs associated with importing and exporting
goods, which in turn opened new markets for sourcing and distributing product. Logistics
Containers could also be easily moved from an ocean vessel to a train or truck, allowing
movement from a factory in China to a plant in the USA in a single container. About
innovation
50 years after McLean’s first container shipment, the equivalent of over 300 million
20-foot containers moves across the ocean each year. McLean’s idea was not the sole
factor leading to the increase in global sourcing, but it played a significant role.
Containerization is only one example of innovating to improve logistics operations. 361
Over the course of time, the logistics industry has seen many examples of innovation.
The importance of finding a better way to move product was identified as early as
1776, when Adam Smith detailed the connections between manufacturers and markets
and transportation inefficiencies in The Wealth of Nations (Donovan, 2004). Since then,
we have seen the steam engine, containerization, electronic data interchange (EDI),
cross-docking, radio frequency identification (RFID), and many other innovations in
the field of logistics.
The purpose of this paper is to examine logistics innovation through a review of
the leading logistics journals. Within the review, a definition of logistics innovation
is offered, along with a proposed model based on variables presented in previous
studies and conceptual frameworks. The review will also present findings from previous
studies to provide a more thorough understanding of logistics innovation.
The Council of Supply Chain Management Professionals defines logistics as:
[. . .] the process of planning, implementing, and controlling procedures for the efficient and
effective transportation and storage of goods including services, and related information from
the point of origin to the point of consumption for the purpose of conforming to customer
requirements.
An effective logistics operation can provide a competitive advantage for a firm and
increase a firm’s market share (Daugherty et al., 1998; Mentzer et al., 2001). Logistics
has also been shown to enhance customer value and logistics executives believe that it
adds value to a firm’s output (Novack et al., 1996; Stank et al., 1998). Much of this value
is generated from the ability to reduce costs and provide delivery solutions according
to customer needs.
While the opportunity to create a competitive advantage through logistics has
inspired researchers to consider various factors leading to higher levels of logistics
performance, the broader concept of innovation has not been addressed in great detail
within the leading logistics journals. In 2005, Flint et al. pointed out that logistics
research has largely ignored innovation. This is especially true when looking at
logistics innovations. The literature does address logistics technologies (EDI, RFID,
etc.) and logistics programs (vendor-managed inventory, cross-docking, etc.) and their
roles in logistics operations and relationships, but there remains a significant gap in
terms of research aimed at understanding drivers of logistics innovation and the
specific benefits of this type of innovation. Many logistics innovations are of particular
interest due to their cost-cutting nature, which can be difficult for competitors to detect
and imitate. Further, theoretical development, understanding, and application of
logistics innovation are warranted.
Before continuing with this review, the reader should understand what is meant by
logistics innovation. Innovation has been broadly defined as an idea, practice, or object
that is perceived as new by an individual or other unit of adoption (Rogers, 1995).
Logistics innovation refers to any logistics-related service that is seen as new and
IJLM helpful to a particular focal audience (Flint et al., 2005). Logistics innovations can be
20,3 very basic to very complex and can be applied to internal operations or services with
business partners (Flint et al., 2005).
The paper begins with an overview of theoretical approaches to innovation. This is
followed by a discussion of the methodology used for the literature review. The next
section introduces a conceptual model and goes on to discuss the articles from which
362 the relationships were derived. The section identifies constructs from the logistics
literature used to predict logistics innovation along with the outcomes of logistics
innovation. This is followed by discussions of limitations and the research and
managerial implications of the literature review.

2. Theoretical applications to logistics innovation

Theories aid researchers in the prediction and understanding of phenomena – the two
primary goals of scientific research (Dubin, 1978). The process of building theories
relies on previous literature; theory is developed through incremental testing and
extension (Kuhn, 1970). There is no single theory of innovation to draw upon to
understand how innovation happens or to explain its internal and external
consequences. Researchers looking at logistics innovation should consider and test a
variety of theories to help explain and understand innovation in the logistics context.
The development and testing of theory is an area in which the logistics innovation
literature is poised for expansion. Innovation has been addressed in many contexts
outside of the logistics literature and the theoretical development from those studies
should be considered for application in a logistics setting. A review of innovation
literature outside the scope of logistics innovation reveals theoretical frameworks that
have shown promise in the study of innovation. A sample of these frameworks
includes:
.
The knowledge-based view of the firm centers on knowledge as the most
important resource of the firm. The uniqueness of a firm’s knowledge is
fundamental in the firm’s ability to develop a sustained competitive advantage
(Grant, 1996; Turner and Makhija, 2006).
.
The dynamic capabilities framework was born out of the resource-based view of
the firm. The dynamic capabilities framework examines the sources of wealth
creation and capture by firms in an environment characterized by rapid
technological change (Teece et al., 1997). Innovation, including new product and
service development, can be characterized as a dynamic capability (Eisenhardt
and Martin, 2000).
.
The Schumpeterian innovation framework considers the impact of firm size and
available resources on firm innovation (Schumpeter, 1942). Schumpeter’s
perspective views large firms as having greater capacity to innovate due to
greater market power and research and development spending.
.
The exploration-exploitation framework considers two distinctive types of
innovation. Exploratory innovations are radical innovations that are designed to
meet the needs of new markets and require new knowledge or a departure from
existing knowledge within a firm (Benner and Tushman, 2002; Benner and
Tushman, 2003; Jansen et al., 2006; Levinthal and March, 1993). Exploitative
innovations are innovations that are incremental and designed to meet the needs
 of existing customers or markets (Benner and Tushman, 2002). Exploitative Logistics
innovations are characterized by refinement, implementation, and efficiency innovation
(Cheng and van de Ven, 1996).
.
The theory of S-curves explains the origins and evolution of radical innovations
(Chandy and Tellis, 2000). S-curves develop as technologies are introduced. Little
consumer benefit is realized in the introduction phase, benefits increase as the
technology develops, and benefits increase at a slower rate as the technology 363
enters maturity (Chandy and Tellis, 2000).
.
Network theory is concerned with the nature of long-term interorganizational
relationships (Thorelli, 1986). The network theory framework in concerned with
variables such as position, power, embeddedness, and density (Dhanaraj and
Parkhe, 2006; Granovetter, 1985; Thorelli, 1986). Network theory research has
considered the roles associated with each firm in a network and the resulting
impact on innovation (Dhanaraj and Parkhe, 2006).

The current research will draw on another theory, resource-advantage theory.

According to resource-advantage theory, firms seek to use their resources to gain a
competitive advantage in the market, which will ultimately lead to superior financial
performance (Hunt and Morgan, 1996). Resource-advantage theory states that a
comparative advantage (disadvantage) in resources results in a competitive advantage
(disadvantage) in the marketplace (Hunt and Morgan, 1996). Resources include a firm’s
assets, processes, information, and knowledge that help a firm improve efficiency and
effectiveness (Barney, 1991). The ultimate goal for firms, according to the
resource-advantage theory, is superior financial performance, which can only be
attained by achieving a competitive advantage in the marketplace. As proposed by
Hunt and Morgan (1996), innovation plays a key role in resource-advantage theory.
Firms will innovate to improve their resource position. Firms occupying positions of
competitive advantage can maintain such positions by engaging in proactive
innovation to ensure that their resources are comparatively better than the resources of
competing firms. Firms occupying positions of competitive disadvantage can attempt
to surpass advantaged firms by engaging in reactive innovation (Hunt, 2002). The
following sections will examine the resources that can lead to logistics innovation,
along with the competitive outcomes of logistics innovation. Based on a review of the
existing literature on logistics innovation the current research offers the model shown
in Figure 1 to guide further understanding of the antecedents and outcomes of logistics
innovation.

3. Methodology
In order to gain a comprehensive picture of logistics innovation research, a review of
the following top logistics journals was conducted: International Journal of Logistics
Management, International Journal of Physical Distribution & Logistics Management,
Journal of Business Logistics, Transportation Journal, and Transportation Research:
Part E. These journals were specifically selected for the review as they represent
leading research in logistics. International Journal of Logistics Management,
International Journal of Physical Distribution & Logistics Management, and Journal
of Business Logistics were cited as the leading journals in the field of logistics among
leading scholars (Svensson et al., 2008). All five journals selected for the review were
IJLM Environmental factors
20,3 Organization of labor (–)
Competition
Capital scarcity
Logistics innovation Competitive advantage

364 Organizational factors

Knowledge Logistics innovation diffusion
Technology
Relationship network factors
Figure 1. Financial resources
Proposed model Management resources

recently included in a call for papers issued by International Journal of Logistics

Management as leading logistics publications.
The review began with a search of each journal in the ABI/INFORM and Business
Source Elite databases. Within each database, the keyword “innovation” was searched
for each journal. The number of articles returned for each search is shown in Table I.
The articles were then reviewed to ensure that they explicitly addressed logistics
innovation. This initial identification of articles yielded research that addressed the
role of logistics in new product innovation, along with research that examined the role
of various technologies in logistics and supply chain operations. These articles were
omitted from the final review as they did not fit the scope of the review. Articles were
then classified into groups based on the contribution each one made on our
understanding of logistics innovation. Constructs from each article were reviewed and
utilized to develop an integrated model of logistics innovation. The review yielded
three distinct aspects of logistics innovation research: antecedents of logistics
innovation, outcomes of logistics innovation, and the diffusion of logistics innovation.
Summaries of the articles used in the final review can be found in Tables II-IV.

4. Literature review and proposed framework

4.1 Organizational factors
A number of studies in the logistics literature have examined organizational resources
and the impact that they have on logistics innovation. One such resource is knowledge.
The impact of knowledge on innovation has been examined within the larger scope of
innovation research using the knowledge-based view of the firm (Dhanaraj and Parkhe,

Journal ABI/INFORMa Business source elitea

International Journal of Logistics Management 65 articles 19 articles

International Journal of Physical Distribution &
Logistics Management 269 16
Journal of Business Logistics 110 13
Transportation Journal 62 12
b
Transportation Research: Part E 1
Table I.
a b
Initial results from Notes: Keyword search for “innovation”; Transportation Research: Part E was not included in the
literature review Business Source Elite database

Author(s)
Autry and Griffis (2008)
Chapman et al. (2003)
Flint et al. (2005)
Flint et al. (2008)
Gellman (1986)
Hakansson and Persson (2004)
Panayides and So (2005)
Wagner (2008)
Zinn (1996)
Logistics
Summary
innovation
Proposes that structural capital, relational capital, and supply
chain knowledge development are positively related to
innovation-oriented performance. The authors use social
network theory to support their propositions
Examines the factors that lead to innovation in logistics 365
services and the contributions of such advancements on firms.
Citing Kandampully (2002), the authors argue that knowledge,
technology, and relationship networks are keys to service
innovation
Interviews with logistics executives finds multiple aspects of
being innovative: setting the stage activities; customer clue
gathering activities; negotiating, clarifying, and reflecting
activities; and inter-organizational learning
Empirical analysis which addresses the processes in which
firms assess customer value and engage in learning. Direct
antecedents to logistics innovation include the extent of supply
chain learning management and the extent of innovation
management
Examines innovative performance of railroads under
deregulation. Proposes that regulation, labor influence, and lack
of channel member innovation were barriers to innovation in
the railroad industry
The combining of resources across supply chains leads to
increased levels of specialization and innovation
Empirical analysis shows that organizational learning mediates
the relationship between relationship orientation and logistics
innovation
Addresses innovation in the German transportation industry.
Presents a model of logistics innovation that identifies logistics
activities (internal search and development, external search and
development, investment in infrastructure and capital goods,
acquisition of knowledge, and training and education) which
leads to the generation of logistics innovations
The economic and competitive environment in Latin America
provides incentive for logistics innovation. Proposed that Table II.
increasing competition and a shortage of available capital Antecedents to logistics
present incentives for logistics innovation innovation

2006; Grant, 1996; Kogut and Zander, 1992; Smith et al., 2005). However, the theoretical
framework has not been explicitly used to explain logistics innovation. In their
conceptual paper on logistics and service innovation, Chapman et al. (2003) offer
knowledge as an imperative in the quest for logistics innovation. The authors state that
technology and capabilities are manifestations of knowledge and that the management
of knowledge within the organization and in interorganizational relationships is the
key in developing new ideas. Autry and Griffis (2008) also propose a positive
relationship between knowledge (supply chain knowledge development) and logistics
innovation in a recent conceptual article. Using a case study approach, Hakansson and
Persson (2004) support this notion as they found that combining resources across
supply chains and the learning associated with the combination of resources creates an
IJLM
Author(s) Summary
20,3
Farris II and Welch (1998) Innovations in the shipping industry can lead to improved
military operations
Fawcett (1991) Technological innovation and logistics capability improves the
ability for firms to take advantage of existing regional
366 economies through co-production
Fawcett and Farris (1989) Innovation in the airline industry allowed incumbent airlines to
reduce competition in the marketplace
Panayides and So (2005) Empirical analysis shows that logistics innovation is positively
related to logistics service provider effectiveness
Persson (1991) Argues that logistics service innovation can provide firms with
a competitive advantage
Richey et al. (2005) Proposed that reverse logistics innovation would be positively
related to strategic performance, operational responsiveness,
and operational service quality. Findings supported the
positive relationship between reverse logistics innovation and
Table III. operational service quality. The relationship between reverse
Outcomes of logistics logistics innovation and strategic performance was supported
innovation in large firms

environment for innovation. Panayides and So (2005) empirically show that

organizational learning, another knowledge construct, mediates the relationship
between relationship orientation and logistics innovation. Empirical support for the
relationship between knowledge and logistics innovation is provided by Flint et al.
(2008) as they show a direct positive relationship between supply chain learning and
logistics innovation.
Flint et al. (2005) used a grounded theory approach to examine logistics innovation
and what it takes to be innovative in offering logistics services to customers. Using
logistics innovation as their outcome variable, the authors offer four sets of activities
associated with being innovative. Grounded theory is the discovery of theory from data
(Glaser and Strauss, 1967). Researchers using grounded theory will often use
qualitative methods for gathering data to gain a thorough understanding of the
phenomenon under review. Flint et al. (2005) interviewed senior logistics managers in
the USA, Scandinavia, and Europe and developed a logistics innovation process model
using four components.
First, “setting the stage activities” are designed to create an environment conducive
to interacting with customers and being innovative. A firm using this process for being
innovative may set the stage for customer interaction by training employees to ask
insightful questions, finding an appropriate place to meet with customer, and ensuring
that the appropriate resources are in place to capture information from its customers.
Second, “customer clue gathering activities” are aimed at getting closer to customers
and developing deeper insights about them (Flint et al., 2005). After setting the stage,
a firm may want to begin gathering information about its customers. This can be done
directly, through interviews, joint planning meetings, or customer retreats. After
gathering customer information, either directly or indirectly, a firm is often faced with
the task of using the information to improve service. However, the initial findings may
not clearly indicate what is needed from the firm. “Negotiating, clarifying, and
reflecting activities” can aid managers in reviewing messages from customers and

Author(s)
Crum et al. (1996)
Dadzie et al. (2000)
Daugherty et al. (1994)
Evangelista and Sweeney (2006)
Germain et al. (1994)
Holmqvist and Stefansson (2006)
Lippert and Forman (2006)
Russell and Hoag (2004)
Sahin et al. (2007)
Sheffi (2004)
Twede (1992)
Williams (1994)
Williams and Rao (1998)
Logistics
Summary
innovation
Identifies factors that differentiate the adoption and non-
adoption of EDI technology among truckload carriers
Firm size, warehouse size, and innovation orientation
positively influence the adoption timing and likelihood of
warehouse automation technologies 367
Depth of knowledge is a predictor of radical and incremental
innovation adoption
Organizations have varying roles to play in the
development and dissemination of information and
communication technologies
Addresses the relationship between logistics technology
adoption and organizational design
Presents a case study from Volvo where RFID solutions are
applied using existing mobile technology among supply
chain partners
Identifies antecedents to technology trust and perceived
long-term consequences of supply chain technology
internalization and the resulting impact on technology
adoption
The diffusion of supply chain technology innovations is
affected by user perceptions, firm culture, communication
channels, and various leadership factors
Explores the benefits associated with the diffusion of time
temperature integrator technology in supply chains
Examines the innovation cycle of previous disruptive
technologies to understand the context and future of RFID
The results of planned packaging innovation can be
differentiation and competitive advantage. Adoption is
affected by the nature of logistics channels and packaging
complexity
Investigates the adoption of EDI and the resulting impact on
inter-organizational relationships Table IV.
Compares technology adoption models to predict the Diffusion of logistics
adoption of automated equipment identification technology innovation

interpreting them to define the insights gained (Flint et al., 2005). Managers can then
work together to determine the most appropriate use of the information, including any
changes or additions to current offerings and operations. The final component,
“inter-organizational learning,” refers to the emerging knowledge that managers of
logistics services gain regarding opportunities for the development of new services,
technologies, and processes (Flint et al., 2005). Collectively, the activities identified in
the Flint et al. study lend additional insight into the process by which the appropriate
knowledge necessary for innovation is obtained and developed.
Wagner (2008) also identified a set of activities that can lead to logistics innovation.
In Wagner’s examination of the German transportation industry, he identifies internal
search and development, external search and development, investment in infrastructure
and capital goods, acquisition of knowledge, and training and education as key activities
in which logistics service providers should engage to spur innovation. The search,
knowledge acquisition, and learning activities can be grouped as knowledge resources,
IJLM which reinforces the knowledge emphasis present in earlier studies. The development
20,3 and investment activities highlight the importance of technology, which has also been
examined as an antecedent to logistics innovation.
Chapman et al. (2003) point to the role that technology has played in helping firms
address challenges associated with time and distance and the communication advances
that technology has enabled. Technology also allows for more efficient sharing of
368 knowledge. The pace of technology change has forced innovation in business processes
as they must adapt to new technology tools (Chapman et al., 2003). In their empirical
study on reverse logistics, Richey et al. (2005) used resource-advantage theory to explain
the importance of innovation in the area of reverse logistics. They proposed that
technological resources would have a positive impact on reverse logistics innovation.
The findings from their study were not significant; however, the sample was limited to
the automobile aftermarket industry. Further examination in other contexts is needed to
better understand the relationships.
Other antecedents to logistics innovation include various relationship factors.
Hakansson and Persson (2004) found that collaboration can lead to innovation.
Chapman et al. (2003) proposed that relationship networks can lead to logistics service
innovation. Specifically, they point to the need for firms to work together to understand
the needs and requirements of customers along with the future requirements of
customers. As a result, firms will enter into horizontal and vertical alliances with other
firms to gain access to knowledge otherwise unavailable to the firm. Gellman (1986)
proposed that the innovation from supply chain partners such as shippers and
suppliers in the railroad industry would spur innovation with the railroads. Similar to
the impact that technology can have, as previously discussed, new products or
processes can create a situation in which other members of the supply chain must
innovate in order to maintain or improve upon logistics operations with these supply
chain partners.
Richey et al. (2005) also examined financial and managerial resources as antecedents
to reverse logistics innovation. These resources, combined with the technological
resources discussed earlier, were argued to be crucial resources in the development of
reverse logistics innovation capabilities. Their findings indicated that there was a
significant relationship between the deployment of managerial resources and
the development of reverse logistics capabilities. However, further examination of the
relationship between financial resources and logistics innovation is warranted as the
general relationship between financial resources and innovation performance has been
supported outside of the logistics literature (Acs and Audretsch, 1987; Chankdy et al.,
2003; Cohen and Levin, 1989).
The following propositions were developed from the preceding discussion:
P1. Knowledge resources are positively related to logistics innovation.
P2. Technology resources are positively related to logistics innovation.
P3. Relationship network resources are positively related to logistics innovation.
P4. Financial resources are positively related to logistics innovation.
P5. Managerial resources are positively related to logistics innovation.
4.2 Environmental factors Logistics
The environment in which a firm operates can impact the firm’s ability to innovate. innovation
However, within the scope of logistics innovation, there has been little examination of
environmental factors. In his research on the barriers to innovation in the railroad
industry, Gellman (1986) pointed to federal regulation of the railroad industry as a
significant barrier to innovative activities among the railroads. The climate that was
created by regulation removed incentives for firms to develop or adopt new internal 369
processes or service offerings. The absence of competitive forces limited the need for
firms to seek innovative process or services. After deregulation, the new business
environment created a need for innovative activity by railroads as they sought to
improve cost structures and service offerings. While the federal regulation of
transportation in the USA is no longer a significant factor, the impact of government
regulation on logistics innovation should be recognized. Specifically, the impact of
government regulation on competition should be considered. Gellman (1986) also
examined the impact of labor on railroad innovation and proposed that in times when
the labor force held higher levels of power, railroad innovation suffered as the labor
force would defeat operational process innovations and equipment innovations.
Zinn (1996) presented an overview of the economic culture in Latin America,
specifically pointing to opportunities for logistics innovation. As part of his research,
Zinn (1996) argued that increasing competition among firms, along with a chronic
shortage of capital provides an incentive for logistics innovation. The inability for
firms to access capital forces them to become creative in how they use their resources,
leading them to innovate within their logistics processes and service offerings. The
relationships discussed by Gellman and Zinn have not been empirically tested and are
offered as the following propositions:
P6. Organization of labor is negatively related to logistics innovation.
P7. Competition is positively related to logistics innovation.
P8. Capital scarcity is positively related to logistics innovation.
Table II provides a summary of the literature from which the antecedents of logistics
innovation were derived.

4.3 Competitive advantage

Fawcett and Farris (1989) published one of the first papers in the logistics literature to
consider innovation as a predicting variable. They examined the airline industry and
found that for incumbent airlines, innovation resulted in reduced competition in the
marketplace (Fawcett and Farris, 1989). Fawcett and Farris cited the actions of the
airlines after deregulation in their efforts to erect barriers to entry, develop economies,
and impose switching costs. An example of this is the hub-and-spoke network design,
which allowed airlines to develop dense networks and reduce their cost structures
(including labor costs). This increased the entry barriers for prospective airlines with a
higher labor cost structure and limited, point-to-point service. The airlines were
successful in accomplishing these tasks, reducing the overall competition in the
industry.
From an operational performance perspective, Fawcett (1991) asserted that
technological innovation and logistics capabilities were positively related to the ability
IJLM of firms to coordinate production activities. Farris II and Welch (1998) proposed
20,3 that transit times on the water could be cut in half using new vessel technology.
While transportation costs were expected to nearly double, the authors suggested that
the time savings will offset the additional cost. In their empirical study on reverse
logistics innovation, Richey et al. (2005) posited that innovation would be positively
related to operational responsiveness. They argued that innovative firms would use the
370 technology and other resources available to them to develop a reverse logistics
program capable of handling varying firm and customer demands. The authors also
proposed that reverse logistics innovation would have a positive impact on operational
service quality. The use of technology and customized exception handling processes
was expected to lead to higher levels of service quality. The study’s findings indicated
that there is a positive relationship between innovation and operational service
quality; innovation and operational responsiveness were not found to be significantly
related.
Richey et al. (2005) also examined the relationship between reverse logistics
innovation and a firm’s performance. In doing so, they stated that logistics innovation
should improve a firm’s market effectiveness and internal cost efficiency. They also
stated that logistics innovations can lead to increased revenues due to added services
and improved customer satisfaction. The findings indicated a positive relationship
between logistics innovation and strategic performance for large firms. Together, the
findings highlighted above indicate a positive relationship between logistics
innovation and the development of a competitive advantage. Persson (1991) argues
that logistics service innovation can provide firms with a competitive advantage. The
author cites examples such as a firm’s use of EDI to improve communications with
customers, and the development of new services to open up new customer markets and
add value to existing customers.
Table III provides a summary of the literature from which the outcomes of logistics
innovation were derived. The proposition resulting from the discussion of outcomes of
logistics innovation is as follows:
P9. Logistics innovation is positively related to a firm’s competitive advantage.

4.4 Logistics innovation diffusion

As stated earlier, resource-advantage theory posits that a firm’s competitive advantage
can lead to innovation among its competitors. Alternatively, competing firms may seek
to imitate or adopt innovations in order to remain competitive in the market (Hunt,
2002). Therefore, it is important to also consider the diffusion of logistics innovations.
Much of the literature that addresses innovation in logistics is concerned with the
diffusion of innovations within and across firms. Several researchers have studied
innovation diffusion by looking at how organizational characteristics and relationships
affect diffusion. The literature in this area has adopted the viewpoint of the firms
adopting the logistics innovations, which is highlighted in the following discussion.
Diffusion of innovation is defined as the process of communicating an innovation
throughout a network (Rogers, 1995). According to this framework, innovation
diffusion consists of four main elements:
(1) innovation;
(2) communication channels;
 (3) time; and Logistics
(4) social system. innovation
An example of a logistics innovation would be containerization (as mentioned in the
introduction). The innovation element of diffusion is concerned with the characteristics
of the innovation. Research in logistics has identified some characteristics of the
innovations themselves that impact diffusion to other firms. A case study looking at 371
incremental packaging innovations found that the complexity of logistics innovations
had a negative impact on the diffusion of innovation (Twede, 1992). In another study
that examined the characteristics of the innovation, Lippert and Forman (2006)
identified technology trust and perceived long-term consequences of technology as
predictors of innovative supply chain technology adoption.
Communication channels are the means by which messages move from one
individual to another. Using the containerization example, we would want to consider
how utilization of containers moved beyond McLean’s experiment to the usage that we
see today (word of mouth, mass media, witness observation, etc.). The first containers
were shipped overseas just over 50 years ago and today containers are used for nearly
all overseas shipments of general merchandise.
The time element of innovation diffusion has also been addressed in the logistics
literature. Researchers have looked specifically at the process of innovation diffusion,
including adoption models and an innovation life cycle (Sheffi, 2004; Williams and Rao,
1998). Sheffi (2004) compared RFID with previous innovations (refrigerator,
automobile and highway system, incandescent lighting, television, and PC) to gain a
historical perspective of the innovation. In his research, Sheffi identifies stages of the
innovation life cycle and uses this as a reference to predict the future for RFID.
The social system is a set of individuals or organizations working toward a common
goal. In the containerization example, the social system of interest would be all
overseas shippers and transporters of general merchandise. Other examples of social
systems include a firm’s supply chain or departments within a firm. Together, these
four elements can help us understand how innovations spread to other people or
organizations.
Using transaction cost analysis, Stapleton and Hanna (2002) examined the impact
that logistics service innovation had on the structure of a steamship line’s social
system. Specifically, the authors examined the advent of the stack train service and the
resulting impact on the structure of the sales function. The authors argued that as
competition in the ocean shipping industry increases, it becomes increasingly
important for sales professionals to differentiate their company from competitors.
Using Williamson’s human behavior and transactional aspects of transaction cost
analysis, along with additional measures specific to the stack train, the authors
developed a logistic regression model constructed to examine a steamship line’s
decision to use an internal or third-party sales force. They found that steamship lines
with higher percentages of containers moving on stack trains (innovation) in a given
market are more likely to use an integrated sales force (Stapleton and Hanna, 2002).
Germain et al. (1994) found that organizational size is a significant predictor of
technological adoption. Larger firms were found to adopt greater levels of technologies
at all cost levels and degrees of revolutionary impact on operations (Dadzie et al., 2000;
Germain et al., 1994). Daugherty et al. (1994) proposed that larger firms may be an
IJLM excellent source of innovative ideas, and benchmarking can lead to the diffusion of
20,3 good practices throughout industry. This flows from the idea that benchmarking can
provide a firm with deeper knowledge of a practice, which is an important predictor of
incremental and radical innovation adoption (Daugherty et al., 1994). Other
organizational characteristics that impact the diffusion of innovations include
innovation orientation, warehouse size, organizational culture, communication
372 channels, and various leadership factors (Dadzie et al., 2000; Russell and Hoag, 2004).
Williams (1994) also found that firm size was positively related to innovation
adoption and, that in the logistics channel, power was an important factor in the
adoption of EDI. The findings suggest that shippers will exercise power over
third-party logistics providers by mandating EDI adoption, using surcharges and the
potential loss of business to encourage compliance (Williams, 1994). This is in line with
the findings of Crum et al. (1996), that EDI adoption is customer-driven, with marketing
benefits outweighing operational benefits of the technology. Other research supports
the notion that third-party logistics providers, particularly smaller ones, may be slow
to adopt new technology (Crum et al., 1996; Evangelista and Sweeney, 2006). However,
researchers also argue that these organizations can play an important role in the
dissemination of such innovations (Evangelista and Sweeney, 2006).
Research has also addressed the benefits of innovation diffusion. Sahin et al. (2007)
considered the benefits in the diffusion of a specific innovation. They developed a
framework to evaluate the cost and quality benefits of using time-temperature
integrators. In another case study, Holmqvist and Stefansson (2006) considered the use
of existing mobile technologies to implement RFID. Collaboration among actors in a
supply chain and the adoption of the innovative use of existing mobile technology can
result in higher levels of reliability, usability, and productivity. Using existing
technologies can also help reduce the costs of developing new infrastructures designed
specifically for RFID.
Russell and Hoag (2004) drew upon the diffusion of innovation framework to
examine IT implementation at two aerospace firms aimed at advancing supply chain
management objectives. The authors used the diffusion of innovation framework to
examine social and organizational influences impacting peoples’ acceptance of
technological innovations designed to improve performance. Russell and Hoag used
two case studies to examine the implementations of a customer relationship
management tool and a web-based service part ordering interface. Each
implementation involved the purchase of software from a third party. In their
qualitative study of these two cases, the authors found that the factors influencing the
success of such implementations include perceptions of the innovation, organizational
culture, types of communication channels used to diffuse knowledge of the innovation,
and various leadership factors such as management level support and breadth of
support (Russell and Hoag, 2004). Table IV provides a summary of the diffusion
literature related to logistics innovation.
As mentioned earlier, the research presented on the diffusion of logistics
innovations considers diffusion from the perspective of the adopting firm. However, it
is also important to examine the diffusion of logistics innovations from the perspective
of the innovating firm. As logistics innovations provide firms with a competitive
advantage, business partners are likely to adopt these innovations and competitors
are likely to imitate successful logistics innovations (Dickson, 1992). Therefore, the Logistics
following proposition is offered: innovation
P10. A firm’s competitive advantage is positively related to the diffusion of
logistics innovation.

5. Limitations 373
As mentioned in the methodology discussion, the current review centers on research
presented in the top logistics journals. There is significant research on innovation in other
areas that should be considered in future examination of logistics innovation. For example,
innovation has been addressed in many areas including strategic management,
marketing, finance, information technology, medicine, sociology, psychology, and
the sciences. Findings from these areas can lend insight into innovation in a logistics
setting.

6. Research implications
This review of the logistics innovation literature has provided a set of testable
propositions, derived from previous studies and conceptual articles aimed at
understanding the role of innovation in logistics. As highlighted throughout the
review, many of the propositions were developed from conceptual articles and have not
been empirically tested in a logistics setting. Future research should be directed toward
testing the propositions offered in this review. Additionally, future research should be
aimed at the development of appropriate measures of logistics innovation as empirical
testing of innovation theories will require measures specifically aimed at logistics
innovation.
The research on diffusion of logistics innovations should also be explored further.
The diffusion literature in the logistics context primarily addresses the diffusion of
specific technologies. Future research should examine the diffusion of logistics services
and processes. Considering the example presented in the introduction, how did the
process for effectively loading and moving containers diffuse to other firms? What
role did shippers have in the diffusion of these processes? How did this compare to
the role of third-party logistics providers?
Much of the existing research in this area addresses the perspective of the firm
adopting the new process or technology. However, there are some interesting questions
that should be addressed from the viewpoint of the innovating firm. What types of
logistics innovations should be diffused to supply chain partners? Are there some
innovations that should be diffused to the greater logistics community? In some cases,
logistics innovation can produce operational efficiencies that provide an advantage in
the marketplace. Since logistics operations will often involve multiple firms, how can
the diffusion of such proprietary processes be prevented?

7. Managerial implications and conclusion

Innovation in the logistics context has not only benefited practitioners in the field of
logistics – they have impacted practitioners in marketing, sales, finance, and even end
consumers. Containerization, cross-docking, EDI, RFID, and temperature-control
technology are only some examples of how innovations in logistics have impacted the
way companies do business. Many logistics innovation are not visible to the greater
IJLM business community as they are manifested in process changes that allow for more
20,3 visible improvements in other areas. For example, improved temperature integrity in
the transportation of produce is not readily detectable by outside parties. However,
more attractive fruits and vegetables in the grocery store are quickly noticed by
consumers. Greater understanding of such innovations and their impact can help firms
establish processes aimed at generating further logistics innovations.
374
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About the author

Scott J. Grawe, MBA, The University of Minnesota, is a PhD candidate in Marketing and Supply
Chain Management at The University of Oklahoma. He has published in the International
Journal of Physical Distribution & Logistics Management, Journal of Business Logistics, and
Journal of Transportation Management. His research interests include logistics innovation,
shipper-3PL relationships, and supply chain integration. His background includes eight years of
managing domestic and international logistics operations and planning in retail and
manufacturing. Scott J. Grawe can be contacted at: sgrawe@ou.edu

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