This paper investigates the relationships between supply chain management (SCM) practices (i.e. strategic supplier partnership, customer relationship, information sharing, information quality, postponement, internal operations) and technological innovation (TI) in a R&D manufacturing setting in Malaysia, with guanxi being the intervening variable. A conceptual model was developed and tested using data collected from 197 Malaysian manufacturing firms for the study. Data set was examined and hypotheses were tested by employing Partial Least Squares-Structural Equation Modelling (PLS-SEM) analysis. The results revealed that internal operations, postponement, strategic supplier partnership, and guanxi have positive and significant relationships with TI; while guanxi mediates the relationships between four SCM practices (i.e. strategic supplier partnership, information quality, postponement, and internal operations) with TI. Findings show that through proper implementation of SCM practices, firms are able to achieve better TI performance. These findings are useful for decision-makers when formulating SCM strategies and focusing on practices that will help them achieve greater TI. This paper also contributes to existing operations management research by empirically validating guanxi as the mediator between SCM practices and TI. From a developing nation perspective, this paper identifies the important relationships that exist between SCM, guanxi and TI. The findings will be of interest to both emerging and other developing nations.

INTRODUCTION

In today’s competitive business world, organizations strive to gain competitive advantage by improving their business processes. An integrated supply chain (SC) is a sound strategy to enhance the competitive position of a firm. Blackwell and Blackwell (1999) emphasised that supply chains compete against one another and at the same time promote environmental sustainability. Both academics and industrial practitioners have dedicated much attention to the development and improvement of supply chain management (SCM) for this reason. Ideally, the SCM philosophy embraces the functions of logistics, operations and materials management, marketing, purchasing, and information technology to generate an effective SC strategy that subsequently leads to an improvement of organizational performance (Devaraj et al., 2007), quality performance (Fynes et al., 2005), and competitive advantage (Li et al., 2006). The research conducted on SCM is also strongly related to the characteristics of the product, as Christopher and Towill (2000) conceived that to be effective, the strategies of SC must be well matched with the characteristics of the product, the surroundings and the competitive strategies of the company. In line with this, Bechtel and Jayaram (1997) pointed out that SCM issues must be considered for research concerning new product development (NPD) (i.e. product innovation). Qi et al. (2009) concluded that when strategies of SC are well matched with product characteristics, firms will have the ability to attain a better organizational performance. Despite the popularity and benefits of SCM on company performance, there exist only few articles that deal with SCM and technological innovation (TI), especially in Malaysia, the context of this study. To the best knowledge of the authors, there are no commonly accepted sub-elements of SCM, and the associations between each SCM dimension and TI have produced inconsistent results in previous research studies (Lau, 2011). Furthermore, limited empirical evidence has demonstrated how different SCM practices simultaneously affect TI (i.e. product and process), nor has past research paid attention to the mediating effect of guanxi between the different types of SCM practices with TI.