Risk-sharing and its role in manufacturer's innovation

This study seeks a more developed understanding of the nature of manufacturers' risk-sharing relations with suppliers and customers and how these relations and the use of manufacturing technologies affect process and product innovation. This study uses telephone survey data drawn from production managers at 300 US manufacturers operating in the chemicals, fabricated metals, industrial equipment, electrical and electronic equipment, and instrument industries. Using factor analysis to analyse the data, three categories of risk-sharing activities are identified - process risk sharing, operational risk sharing, and asset risk sharing. Further analysis shows firms adopt the same types of risk-sharing activities with both suppliers and customers, and the adoption of manufacturing technology is correlated with the adoption of process risk sharing. Leadership in process and product innovation is significantly influenced by the adoption of process risk-sharing and manufacturing technology.