Relation-specific capabilities and barriers to knowledge transfers: Creating advantage through network relationships

This study examines the role of network knowledge resources in influencing firm performance. More specifically: Can a firm that uses the identical supplier network as competitors and purchases similar inputs from the same plants achieve a competitive advantage through that network? In a sample of U.S. automotive suppliers selling to both Toyota and U.S. automakers, we found that greater knowledge sharing on the part of Toyota resulted in a faster rate of learning within the suppliers' manufacturing operations devoted to Toyota. Indeed, from 1990 to 1996 suppliers reduced defects by 50 percent for Toyota vs. only 26 percent for their largest U.S. customer. The quality differences were found to persist within suppliers because the interorganizational routines and policies at GM, Ford, and Chrysler acted as barriers to knowledge transfers within suppliers' plants. These findings empirically demonstrate that network resources have a significant influence on firm performance. We also show that some firm resources and capabilities are relation-specific and are not easily transferable (redeployable) to other buyers or networks. This result implies that a firm may be on its production possibility frontier for each customer but the productivity frontier will be different for each customer owing to constraints associated with the customer's network. Copyright (c) 2006 John Wiley & Sons, Ltd.