The Product Quality Impact of Aligning Buyer-Supplier Network Structure and Product Architecture: an Empirical Investigation in the Automobile Industry

There has been a trend, in the last decade, of buyers outsourcing new product development (NPD) activities to suppliers. This study examines the impact of (mis) alignment between buyer-supplier network structure and product architecture on two product development outcomes: product quality and product recalls. The hypotheses are tested on a uniquely assembled database of supplier networks of automakers for 12 vehicle systems. The results suggest that while dense supplier network are associated with higher future product quality and lower future recall magnitude, structural holes are associated with lower future product quality and higher future recall magnitude. Further, the results suggest that product quality partially mediates the relationship between supplier network characteristics and recall magnitude. Interestingly, these effects are significantly moderated by the product architecture. While network density is positively related to product quality of weak design interfaces (i.e., modular systems), structural holes in the supplier network are positively related to product quality of strong design interfaces (integral systems). The results offer valuable insights to managers about the appropriate supplier network structure for superior quality.