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Dynamic capabilities and innovation in supply chains

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 DYNAMIC CAPABILITIES AND INNOVATION IN SUPPLY CHAINS

Maree Storer
University of Queensland
m.storer@business.uq.edu.au

Paul Hyland
Queensland University of Technology
paul.hyland@business.qut.edu.au

Abstract
Supply chain relationships between firms are increasingly important in
terms of both competitiveness and developing dynamic capability to respond
to rapid changes in the market. Innovation capacity both in firms and in
supply chains is also integral to responding to dynamic markets and
customer needs. This explorative research examines a sample of firms active
in supply chain relationships in Australia, as a pilot study, to examine any
linkages between firm dynamic capabilities and supply chains developing
innovative capacity to meet competitive and market changes. Initial findings
indicate that although firms focus on developing capabilities, particularly
dynamic capabilities to innovate individually, these preliminary findings
indicate little reliance on developing their supply chain innovation capacity.
This study is the initial stage of more extensive research on this topic.

Key Words: Supply chain relationships; innovation; dynamic capabilities

INTRODUCTION

Recent management literature suggests that relying on just the individual or the single
focal organisation for economic and industry competitiveness is unsustainable (Hamel,
G. and Breen, B., 2007). Adopting a strategic approach to developing supply chain
relationships (Miles, R. E. and Snow, C. C., 2007) are seen as critical to survival for
many firms. Additionally, the literature indicates that varying types and natures of
supply chain relationships, such as coordinating, cooperating, partnering and
collaborating within supply chains (Lambert, D. M. and Knemeyer, A. M., 2006a, Lee,
C. W. et al., 2007, Maloni, M. A. B., .C., 2000, Parry, G. et al., 2006, Skjoett-Larsen,
T., 1999), affects supply chain relationships. Particularly, the range of intra and inter-
organisational competence (Blomqvist, K. and Levy, J., 2006), and dynamic capabilities
(Eisenhardt, K. M. and Martin, J. A., 2000, Petroni, A., 1998, Rothaermel, F. T. and
Deeds, D. L., 2006, Savory, C., 2006, Teece, D. J. et al., 1997, Zott, C., 2003) available
from its participants. These capabilities are most relevant in terms of the supply chain
developing an innovation capacity, which is often the catalyst to realign to meet the
needs of new or emerging conditions in the market, and develop new market trajectories
(Storer, M. et al., 2007). The aim of this research is to explore further supply chain
relationships and how dynamic capabilities influence developing innovation capacity
through the supply chain.

This research examines dynamic capabilities in the context of a supply chain, which
includes the firm. Whilst acknowledging the supply chain as a whole does not enact all

ISBN 978-90-77360-12-5 © CINet 2009 912 CINet 2009

its capabilities, this study argues that the application of dynamic capabilities requires
both the abandoning of old configurations and the development of new configurations
to maximise its innovation capabilities (Stevenson, M. and Spring, M., 2007). This
study explores the ability of the supply chain to use and re-configure its intra and inter-
organisational competence according to changes in the supply chain’s environment and
strategic direction. An existing framework, combining work based on modelling the
degree of change (Iacobucci, D., 2008), and ‘best value’ supply chain management
(Ketchen, D. J. and Hult, G. T. M., 2007), supports the exploration of a series of supply
chain dynamic capabilities, and analysis of the changes experienced by a supply chain
firms across a continuum. This degree of change ranges from a low to medium to high
degree of change, by addressing two main questions:
Q1 How does the nature and type and relationships between firms in the
supply chain influence the intra and inter-organisational competence to
develop dynamic capabilities of a supply chain?
Q2 What dynamic capabilities do firms develop to create innovation capacity
within a supply chain?

MANAGING RELATIONSHIPS AND INNOVATION CAPACITY IN THE SUPPLY CHAIN

Recent organisational literature has bridged supply chain management and strategic
management literature to argue competition no longer revolves around individual
organisations; the supply chain is increasingly becoming the focus of competition in the
market (Crook, T. R. and Combs, J. G., 2007, Holcomb, T. R. and Hitt, M. A., 2007).
As globalisation drives rapid change in all aspects of market and company operations,
strategic supply chain relationships are seen as critical to high performance and
developing innovation capacity to meet both supply and demand (Soosay, C. A. et al.,
2008, Wang, W. Y. C. et al., 2007a, b, Wang, X. J. and Peng, J. S., 2008). Historically,
supply chain management thinking has been informed by knowledge from narrow
functional areas, yet continues to be largely eclectic, with little consensus on its
conceptualization and research methodological bases (Burgess, K. et al., 2006). Few if
any studies address the issue, of the supply chain as the competitive force, from the
perspective of the supply chain as the source of innovation capacity, or as the unit of
analysis, with the bulk of research to date focussed on the individual firm. There also
appears to be few if any studies that explore the core proposition at the heart of this
research- that supply chain relationships are strategically assembled by firms to acquire
resultant competences and capabilities, particularly dynamic capabilities that ensure
competitive advantage through the innovation capacity of the supply chain. This
proposition is the subject of this exploratory study and articulated in Figure 1.

913
 Supply Chain External
SUPPLY CHAIN DYNAMIC
SUPPLY CHAIN MANAGEMENT CAPABILITIES

NATURES AND TYPES OF SUPPLY CHAIN SUPPLY CHAIN INNOVATION CAPACITY

RELATIONSHIPS AND RELATIONAL
CAPABILITIES

MARKET TRAJECTORIES AND

COMPETITIVE ADVANTAGE

Figure 1: Supply Chain Relationship Framework

The Nature and Type of Supply Chain Relationships

Supply chain relationships are groups of organisations entering into business
relationships in order to secure supply and demand as part of a market dynamic
(Lambert, D. M. and Knemeyer, A. M., 2006b).

Competitive supply chain relationships, for example, describe those rivalries between
supply organisations and units, within the same supply chain, for resources and
capabilities (Barney, J., 1991a), in order to supply to an end user client. It also describes
organisations competing indirectly, with those who substitute and develop product
substitutes that may not be similar to one another on a superficial basis, but are similar
in terms of their use (Peteraf, M., A. and Bergen, M., E. , 2003). Alternatively,
cooperative relationships are the opposite to competition as relational states, and
describe different levels of interdependence amongst supply chain firms, such as formal
and informal states of coordination, partnerships, collaboration, and coopetition within a
supply chain, as they converge interests and strive to derive mutual benefits (Contractor,
F. J. and Lorange, P., 1988).

Coordinated supply chain relationships are the simplest form of cooperation between
supply chain partners, often represented as a transactional, arms-length relationship,
typically contractual and formal by nature, and exemplified in 3rd party and 4th party
logistics relationships (Gattorna, J. et al., 2003, Skjoett-Larsen, T., 2000). Suppliers
contract to outsource all or part of a supply chain activity, such as logistics to a
coordinating supplier, which might include individual transport and warehousing needs
or involve a totally integrated service from production to delivery of an end use product
or service.

Other cooperative relationships described in the literature are partnerships, which for the
purposes of this research, describe more formal and integrated relational states.
Partnerships are the easiest method of finding varying levels of alignment and
integration within supply chain relationships, due to the limited number of participants
in the relationship. Supply chain partnerships are those that share formal, specific,
strategic, and/or operational objectives within the chain. Partnerships can occur between
either competitive or non-competitive relationships, at either the vertical or the
horizontal levels within the chain. Partnerships are those supply chain relationships that
are specific to either dyadic, two-way formal supply chain relationships (Gulati, R.,
1995, Gulati, R., 1998, Gulati, R., Nohria, N., Zaheer, A., 2000) or triadic, three way
formal relationships (Madhavan, R. et al., 2004), and share a high degree of integration
through mutual and specific agreements.

914
Collaborations on the other hand, for the purposes of this research, refer only to
demand, supply or combinations of those types of supply chain relationships that are
greater than the sum of dyadic or triadic partnerships. Although it is acknowledged that
in the literature, predominantly partnerships and collaborations are used in the same
context and more often than not used interchangeably (Holweg, M. et al., 2005, Maloni,
M. J. and Benton, W. C., 1997). Collaborative relationships also involve high levels of
integration and cooperation, through aligned and formalised intra and inter-dependent
relational states within each supply chain unit (Noordewier, T. G. et al., 1990), but are
greater in number than those found in a dyadic or triadic partnership. Through all levels
of formal cooperation in supply chain relationships, this process can involve sharing
research and development activities, strategic management initiatives, personnel,
innovation activities, supply chain functions, processes, and systems, in order to affect
supply and demand requirements from the market. Although competitive supply chain
relationships are more likely to occur predominantly across the horizontal axis of the
supply chain, with cooperating relationships occur more readily within the vertical axis,
this is not always the case, as competitors within a supply chain can cooperate - a
relationship described as coopetition (Brandenburger, A. M. and Nalebuff, B. J., 1996).
Bridging competition with cooperation in supply chain relationships, has seen the
development of the term coopetition (Brandes, O. et al., 2007), and represents a good
example of formalised cooperation in the form of either a partnership or a collaboration
of broader proportions, but specifically between competitors operating in the same
supply chain. Originally based on games theory (Brandenburger, A. M. and Nalebuff,
B. J., 1996), it describes competitor relationships that align and share resources through
formal agreements framing the relationships between competing firm on how
cooperation and collaboration will take place. These activities are identified and
formalised in order that the individual competitive advantage of each partner or
collaborator is not diminished, and to ensure the relationship delivers enhanced
performance and profitability to each competitor (Dagnino, G. B. and Padula, G., 2002).

Additionally, the literature notes that competitors in a supply chain remain fierce in
relation to the end customers, yet information trades openly in other areas that drive
down total costs through activities such as, working together in early stage innovation
processes, developing economies of cost and scale, or influencing government policy.
Co-operating organisations within a supply chain can develop interdependences over
either short, medium, and longer terms, and agree to share capabilities, resources, and
information through contractual or non-contractual means, or a mixture of both. While
misaligned supply chain relationships often cause operating income to drop over time,
return on sales to fall and return on assets to decrease (Wadhwa, S. et al., 2008),
producing a slowing in overall sales growth, higher total landed costs and increasing
inventories (Blanchard, D., 2007). Figure 2 outlines the interplay between relationship
factors of the supply chain, such as the nature and types of relationships, their longevity
within a supply chain, and the types of business exchanges expected (developed through
an adaptation of work by Wagner and Boutellier, (2002). It depicts short-term, arms
length and purely transactional supply chain relationships (Barney, J., 1991a, b) can be
influenced by various levels of and strategic management through intent (Hamel, G. and
Prahalad, C. K., 1989) and integration (Spekman, R. E. et al., 1998). This often leads to
more formalised medium to long-term partnerships and collaborations (Lambert, D. M.
et al., 1996), between both competitors and non-competitors.

915
 B S
Supply Chain Relationship Types versus Nature of Business Exchanges T
U
S R
I Long Term A
Relational Degrees of Coordination and Cooperation Partnerships
N T
E and E
S Collaborations G
S I
Level of strategic intent to
develop supply chain capabilities C
E
X I
Arm’s Length
C N
Relationships T
H Degrees of Competition and Coopetition
A Short Term E
Discrete
N N
G T
E One-time Transactional SUPPLY CHAIN OPERATIONAL INTEGRATION Ongoing Formal Integration

Figure 2: Degrees of exchange between supply chain relationships adapted from

Wagner & Boutellier (2002).

Supply Chain Innovation Capacity- Dynamic Capabilities

Supply chain innovation capacity describes the intra and inter-organisational
competence within a supply chain to cooperate, to identify, develop, and implement
original, solution-oriented actions that address new or previously unsolved problems
(Storer, M. et al., 2007). Employing a supply chain’s innovation capacity indicates the
willingness of groups of actors within the supply chain to take steps, or perform
activities that ultimately produce output that improves or changes current activities to
meet a market need or new trajectory. This research proposes the supply chain, like the
firm, uses innovation to provide unique value adding solutions for the supply chain that
provides a market competitive advantage. The innovation capacity of the supply chain is
driven by the choices made through intra and inter-organisational cooperation in respect
of an innovation episode (Clark, P. et al., 1992) and its deployment.

The ability to acquire and utilise knowledge effectively is critical for a supply chain’s
innovation activities and performance (Cohen, W. and Levinthal, D., 1990). The way
knowledge processes are managed within and between businesses has emerged as a
major theme in recent research (Jantunen, A., 2005). Firms are increasingly dependent
on their customers, suppliers and even competitors as initiators of product and process
improvement and sources of new ideas (Von Hippel, E., 1988). In order to utilise
externally generated knowledge businesses have to internalise it and then combine the
information and new insights with the existing knowledge base. The dynamic capability
view of a supply chain conceives the business as a knowledge processing and utilising
entity (Teece, D. J. et al., 1997). The dynamic capabilities approach explains “how
combinations of competences and resources can be developed, deployed and protected”
(Teece, D. J. et al., 1997) to create firm-specific capabilities that can provide a
competitive advantage. Actors in supply chains need to be able to recognise changes in
the environment and utilise opportunities that evolve to meet changing market demands.
According to (Savory, C., 2006) supply chains do not only need to reconfigure existing
capabilities and resources to meet strategic and environmental changes, they must
relinquish old configurations in developing the newly reconfigure capabilities.

916
The growing intensity of competition has forced many supply chains to focus on their
resources and capabilities to survive and excel in dynamic markets. This research refers
to resources as those tangible and intangible assets in the organisation or the
participating firm of the supply chain (Maijoor and Van Witteloostujin, 1996); whereas
capabilities refer to the firm’s ability to exploit, combine and reconfigure those
resources. Dynamic capabilities occur when assets, abilities and competencies are used
to create strategies and activities that address specific markets and customers needs in
distinctive ways (Eisenhardt and Martin, 2000). These capabilities are the driving force
for innovation in some supply chains, because they can generate, evolve and recombine
resources into new sources of competitive advantage (Teece et al., 1997). To understand
the relationships between dynamic capabilities and innovation, it is important to
recognise what Prieto and Easterby-Smith (2006) see as the link between knowledge
and dynamic capabilities. They maintain that the dynamic capabilities that enable and
underpin long-term ongoing renewal require both exploitation of pre-existing
knowledge and exploration of “new knowledge-based competences” (Prieto, I. and
Easterby-Smith, M. P. V., 2006). New knowledge and technologies, as well as existing
knowledge and technologies, over time translate into meaningful operational process,
practices and systems.

METHODOLOGY

The study reported in this article is an exploratory pilot study across a small sample of
Australian companies, developed from data collected through a self-administered
questionnaire sent by email to a purposive sample of 200 organizations. These
companies were limited to those actively involved across the broad spectrum of supply
chain activities and relationships, and following receipt of the questionnaire and after
telephone follow-up, 32 respondents returned completed questionnaires. Respondents
represent the core areas of supply chain activities (production, processing and
manufacturing, logistics, wholesaling, retailing and services) and come from senior
levels within the organizations engaged. As the study sample size is small and
descriptive statistics utilized, the results only provide basic indications of how some
firms relate to their supply chain in terms of dynamic capabilities and innovation
capacity, and will form part of a much larger study. Therefore, non-parametric tests that
are more suitable to larger sample sizes are not used. Descriptive ranges utilized in this
study relate to the levels of importance the firms attach to the relevant topics, from no
importance to moderate importance to high importance, or not applicable at all.

DISCUSSION OF RESULTS

Generally, although this is a small study, many of the respondent firms were developing
or attempting to develop strategic supply chain relationships over the longer term,
particularly through supply chain partnerships as opposed to larger scale collaborations.
Over 50% of firms indicated they were always seeking to form long-term two or three-
way contractual partnerships, with only 30 % were involved in short term contracts.
However, even less (< 17%) were involved on a regular basis in cooperative
arrangements with competitors (coopetition). In terms of actual capabilities identified in
the literature as important to firms establishing supply chain relationships, only 49% of
respondents maintained it was important to develop joint strategic routines. In terms of

917
developing supply chain innovation capacity, shared learning was important, as is
developing joint R&D and innovation capability (Table 4). None the less more than
52% of firms maintained it was very important or critically important to remain at arm’s
length from partners in operational routines, which appears contradictory to overall
intent to develop supply chain capability. Exploring firm attitude to supply chain
cooperation, Table 1 shows the level of importance respondent firms place on alignment
and integration activities identified in the dynamic capabilities literature as integral to
partnering or collaborating for competitive advantage. Interestingly, more than 53% of
firms maintain that developing joint capabilities to respond to market changes is of high
importance. However, contradicting this are the low numbers of firms identifying the
need to align other strategic and innovative activities with supply chain partners of high
importance.

Activities that are important in maintaining supply chains Low Moderate High N/A
importance importance importance
Aligning functions across supply chain organisations 16.13% 25.8% 53.3% 6.5%
Aligning complementary organisational capabilities 19.35% 29.0% 46.6% 6.5%
Integrating and aligning communication and information systems 16.13% 32.3% 49.9% 3.2%
Integrating logistics across supply chain organisations 9.68% 32.3% 53.3% 6.5%
Integrating governance and quality systems 16.13% 29.0% 49.9% 6.5%
Aligning management strategies 22.58% 29.0% 40.0% 9.7%
Aligning financial capability 32.26% 32.3% 26.6% 9.7%
Integrating and aligning research, development and innovation 25.81% 45.2% 23.3% 6.5%
capability
Developing collective market strategies 22.58% 48.4% 20.0% 9.7%
Developing joint capability to respond to changing market conditions 0.00% 38.7% 53.3% 9.7%

Table 1: Supply chain maintenance activities

In terms of dynamic capabilities required to develop supply chain innovation capacity,
the literature identified that supply chain actors need to be able to react to change and
realign their capabilities to address changes in the market. Table 2 provides an
indication of the respondents’ attitudes toward adapting, reconfiguring and coordinating
capabilities to meet supply chain market needs. Although more than 60% of firms in
this study see these areas as highly important, few saw coupling and decoupling supply
chain relationships to acquire a different mix of resources and capabilities (<25%) in the
same light. Aligning functions to meet supply chain demands (56% of respondents) is
also very important, although this is not aligned with ensuring the ability to
acquire/shed resources and capabilities on demand (31%).

Supply chain dynamic capabilities to meet changing Low Moderate High N/A
markets and customer requirements Importance importance importance
Ability to align functions with supply chain demands 6.25% 28.13% 56.25% 9.38%

Ability to align infrastructure requirements with supply chain 9.38% 28.13% 53.13% 9.38%
demands
Ability to align human resources and capabilities with supply 9.38% 28.13% 53.13% 9.38%
chain demands
Ability to adapt processes, products and systems to market and 3.13% 18.75% 65.63% 12.50%
customer needs
Ability to reconfigure/recombine resources and capabilities on 3.13% 21.88% 62.50% 12.50%
demand
Ability to coordinate and integrate resources and capabilities 3.13% 21.88% 62.50% 12.50%
on demand
Ability to develop individual and group barriers to market 25.00% 21.88% 40.63% 12.50%
imitation

918
 Supply chain dynamic capabilities to meet changing Low Moderate High N/A
markets and customer requirements Importance importance importance
Ability to identify and react to market dynamics - moderate 3.13% 37.50% 46.88% 12.50%
markets versus high-velocity
Ability to acquire/shed resources and capabilities on demand 15.63% 43.75% 31.25% 9.38%
Ability to couple and decouple supply chain relationships to 15.63% 46.88% 25.00% 12.50%
acquire different mix of resources and capabilities
Ability to attract new combinations of resources and 12.50% 21.88% 53.13% 12.50%
capabilities to meet customer and market demand
Ability to revamp existing operational capabilities 12.50% 18.75% 59.38% 9.38%
Ability to revamp existing strategic directions in line with 9.38% 25.00% 56.25% 9.38%
market dynamics
Table 2: Market change capabilities
In terms of ensuring a supply chain competitive advantage through innovation capacity
within the supply chain, various dynamic capabilities are more important than others
are, in the minds of these respondents. Table 3 shows that maintaining a competitive
advantage through supply chain activities is overwhelming through the development of
a continuous improvement capability (>87%) and having the ability to develop and
manage new technologies (>81%). Interestingly, taking into consideration the
importance of climate change and the proposed carbon trading emissions scheme at this
time, respondents did not see the ability to adapt and align to climate change and other
environmental challenges as highly important (>46%).

Supply Chain Innovation Capacity to ensure competitive Low Moderate High

advantage of supply chain Importance importance importance N/A
Ability to realign supply chain relationships to create new capability
and resources 15.63% 31.25% 40.63% 12.50%
Ability to create a new vision and strategic direction and manage for
change 9.38% 15.63% 62.50% 12.50%
Ability to successfully create implement and transfer new ideas
across supply chain relationships 6.25% 25.00% 56.25% 12.50%
Ability to harness internal and external organizational intelligence to
create new markets 0.00% 34.38% 50.00% 15.63%
Ability to develop organisational structures and systems for changing
demand 12.50% 25.00% 50.00% 12.50%
Ability to adapt to cultural shifts in line with new product, process or
system developments 12.50% 18.75% 53.13% 15.63%

Ability to develop and manage new technologies 0.00% 9.38% 81.25% 9.38%
Ability to continuously develop and manage incremental
improvements and changes to products processes and systems 0.00% 3.13% 87.50% 9.38%
Ability to adapt and align to climate change and other environmental
challenges 15.63% 31.25% 40.63% 12.50%
Ability to adapt and align to political and regulatory change and
challenges 9.38% 25.00% 56.25% 9.38%
Ability to develop and implement financial and cost-benefit solutions
for changing market conditions 3.13% 28.13% 59.38% 9.38%
Ability to develop and implement integrated logistics solutions for
changing market conditions 12.50% 25.00% 46.88% 15.63%

Ability to develop and implement quality and monitoring systems 9.38% 9.38% 71.88% 9.38%
Ability to develop and implement full tracking and trace-back
systems for product 15.63% 21.88% 46.88% 15.63%
Table 3: Supply chain competitive advantage activities
Finally, in terms of dynamic capabilities and creating a competitive advantage, while
incremental innovation was critically important for competitive advantage at a firm
level, this appears unsupported at the inter-group level of the supply chain, with only
39% of respondents raising this as highly important. An again also supported in this
table was the fact that only 42% of respondents saw the ability for organisations within
a supply chain to reconfigure and recreate resources and capabilities on demand as

919
highly important. Although over 64% of respondents do acknowledge the role that the
ability of organisations within a supply chain to innovate internal resources and
capabilities plays. Another important aspect, as related earlier, is the ability for
individuals and groups within a supply chain to create new learning from each other
(>57%). Similarly only 50% of firms felt it was highly important to align and integrate
resources and capabilities as required on demand to meet the nature of business
exchange and create new product, process and systems in the supply chain. It is
apparent that these respondent firms in Australian supply chains focus more on
innovation and improvement at the firm level than in utilising their relationships with
their supply chain partners.

Important capabilities to create a competitive advantage No Moderate High N/A

importance importance importance
The ability for individuals and groups within supply chains to create new 7.1% 32.1% 57.1% 3.6%
learning from each other
The ability for organisations within a supply chain to reconfigure and 7.1% 46.4% 42.9% 3.6%
recreate resources and capabilities on demand
The ability of organisations within a supply chain to innovate by 7.1% 39.3% 50.0% 3.6%
integrating resources and capabilities as required and on demand
The ability of individual organisations to innovate internal resources and 0.0% 32.1% 64.3% 3.6%
capabilities for the competitive advantage of the supply chain
The ability of a supply chain to align and realign organisational resources 17.9% 28.6% 50.0% 3.6%
and capabilities to meet the nature of the business exchange
Develop intergroup relationships that create new product, process and 21.4% 25.0% 50.0% 3.6%
systems development across the supply chain
Develop intergroup relationships that develop continuous product, process 10.7% 46.4% 39.3% 3.6%
and systems improvements across the supply chain
Develop strategic practices that ensure new and continuous improvement 10.7% 35.7% 50.0% 3.6%
in management and operational practices across the supply chain

Table 4: Competitive advantage capabilities

CONCLUSION

This is an exploratory pilot study of Australian firms and their attitude toward
developing dynamic capabilities and innovation capacity within the supply chain, with
initial findings indicating that firms still firmly focus on their own individual innovation
capacity. There is some recognition of the potential of aligning and developing supply
chain innovation capacity through supply chain relationships, but the respondents in this
study still appear conflicted in how that might happen. At the same time, the literature
advocates that supply chains that have engaged effective organisational relationships, in
the form of partnerships or collaborations, can and do create innovation capacity, by
sharing competencies, capabilities and resources. This process often occurs in a
dynamic and innovative manner in response to changes in the business environment or
in response to customer demand. This study confirms that this is recognised, yet
respondents did not rate it as highly important overall, particularly when compared to
developing internal organisational capabilities and resources to innovate for a
competitive advantage.

In the literature, loosely aligned supply chains are less likely to engage in strategic
partnerships or large-scale collaborative relationships to innovate for a competitive
advantage (Cox, A. et al., 2001, Fearne, A. A. H., D, 1999, Hyland, P., W., et al., 2003,
Soosay, C. A. et al., 2008). While Coordinating, cooperating, partnering and

920
collaborating within supply chains, and adopting a strategic approach to developing
supply chain relationships (Miles, R. E. and Snow, C. C., 2007) are seen as critical to
survival in the literature and by some firms, the firms in this study have only recognised
the benefits of long term partnerships. So it is not surprising that few firms have been
able to bridge competition with cooperation in supply chain relationships, and engage in
coopetition (Brandes, O. et al., 2007). It appears the respondents can see that strong
relationships in the supply chain engender forms of formal cooperation and provide
some impetus to improve competitive advantage for those involved, especially through
continuous improvement and innovation practices. However, equally so, recognising
weakly aligned supply chains fails, if sharing resources and transferring capabilities and
competencies, particularly dynamic capabilities, are not highly important to developing
a supply chain’s capacity to innovate in response to rapid changes in the market.

These initial findings form part of a broader study to inform and extend the existing
theoretical models of Wagner & Boutellier (2002) and Ketchen et al., (2007), and
understand whether firms can strategically develop intra and inter-organisational
relationships within a supply chain to improve innovation capacity and competitive
advantage. Particularly of interest is the ability of the supply chain actors to adapt,
integrate and align new skills, resources and functional competences to match the
requirements of a changing environment (Teece, D. J. et al., 1997) in a dynamic
manner. These findings although not generalisable and limited through the small sample
and scale of the study still provide good information for further research to determine if
the findings apply to other supply chains both in Australia and internationally.

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