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‘Black-Box' and 'Gray Box' Supplier Integration in Product Development: Antecedents, Consequences and the Moderating Role of Firm Size,”

By Xenophon Koufteros, Lai, K.H., Cheng, T.C.E.

June 2007

Journal of Operations Management, Vol. 25, #4, pp. 847-870


Here we investigate antecedents and consequences of supplier integration (black-box and gray-box) in product development activities. Antecedents include embedded-ness with suppliers, supply base rationalization, and supplier selection based on product development capabilities. Product innovation and quality are modeled as returns of supplier integration in product development. We also assess the moderating role that firm size may play in the relationships we posit. Our research framework relies primarily on the social network perspective (SNP), and using a sample of 157 firms we found support for many of the posited hypotheses. Specifically, we found that embedded-ness with suppliers is positively related to supply base rationalization and supplier selection based on product development capabilities. Supply base rationalization has a significant positive impact on gray-box integration (i.e., suppliers working along side the customer's engineers for product development), but not on black-box integration (i.e., suppliers carry out on their own the development of components or parts for the customers). On the other hand, selecting suppliers based on their product development capabilities leads to higher levels of both gray-box and black-box integration. Only gray-box integration manifests statistically significant positive effects towards product innovation. The effects of black-box integration are negligible. Product innovation exhibits strong positive effects on quality. We also found partial support for the moderating impact of firm size. Supply base rationalization practiced by small firms has a statistically significant negative impact on black-box integration but there is no statistically significant effect for large firms. Supply base rationalization is statistically related to gray-box integration only for large firms. Finally, the positive effects of product innovation on quality are more potent for large firms.


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