Linking sourcing and collaborative strategies to financial performance: The role of operational innovation

In this study we investigate the influence of subcontracting-in production related jobs, outsourcing and collaborations with non-supply chain partners on small manufacturing firms' operational innovation. Further, we investigate the mechanism through which these sourcing and collaborative strategies influence small firm performance by focusing on the potential mediating role of operational innovation in the relationships. The structural equation modeling analysis of data collected from 476 small manufacturing firms, suggests that outsourcing, subcontracting-in, and collaborations with non-supply chain partners are positively related to operational innovation. Further, the structural equation modeling results indicate that operational innovation fully mediates the influence that subcontracting-in has on financial performance but partially mediates the influence of outsourcing and collaborations with non-supply chain partners on small firm financial performance. Implications for theory and practice are discussed.

► In this study we focus on the antecedents and consequences of operational innovation.
► We link sourcing and collaborative strategies with operational innovation and performance.
► Sourcing and collaborative strategies positively relate to operational innovation.
► Operational innovation ties sourcing and collaborative strategies to performance.
► Study addresses the blurring of firm level decisions with internal operations and performance.