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Supply chain management research has gained popularity, developing from the study of short-term dyadic relationships towards examining the multiple links contained in strategic supply chain networks involving long-term collaborators. We present a study of how an intermediary firm, which has no direct contact with its end users, built up a learning business system across its supply chain network to develop sustained competitive advantage. We argue that an intermediary firm with specific internal resources can develop a learning business system in a supply chain setting, and that such a firm — where it holds capabilities to integrate collaboration and leverage competition across its value chain — can build up hard-to-imitate competences for itself and the supply chain as a whole. Our findings demonstrate that an intermediary firm can proactively lead its material suppliers, manufacturers and brands in participating in a structured learning business system to the mutual benefit of its supply chain collaborators. The system is underpinned by certification mechanisms that advance technological product skills, develop capabilities, and maintain competition by not designating particular upstream suppliers to downstream buyers, and may eventually allow the intermediary to “set the rules of the game” in its industry. Overall, we conclude that an intermediary firm can create a learning business system that develops and maintains deeply embedded competences through establishing mechanisms for both collaboration and competition across its value chain.

Taiwan's machine tool industry is one of the few industries that do not depend on the support of foreign technologies. Nevertheless, it relies on the development of supplier networks among individual enterprises. This study clarifies the customer value creation mode of Taiwan's machine tool enterprises in a regional innovation system (RIS) by understanding the meaning of the value offered by suppliers to their customers and the dynamic development of value creation models across the boundaries of RIS. In this study, we use as dimensions the customer's perspective of value, the supplier–customer interaction, and particularly the customer involvement to derive the value creation theory. We propose four models of value creation, including a high degree of product standardization with standard recommendations to the customer; product customization with the customer entering into the supplier's process of achieving the customers' preferences; customers and suppliers co-working in a mutual business process to co-create solutions; and the supplier developing a better understanding of customer needs to provide optional solutions. This study demonstrates that four types of value creation have been evidenced in Taiwan's machine tool industry from the viewpoint of the customer, and each type of value creation has its respective environmental and workable conditions. When accompanied by various RIS factors such as customer value creation, this not only develops dynamic growth but also, to a certain degree, affects the growth in competitiveness of the region and its companies. In a highly customizing, flexible, and demanding environment, enhancing customers' value creation beyond their functional requirements while reducing the interaction costs associated with customization may be a challenge for a single enterprise; however, it may prove to present an opportunity to shift Taiwan's machine tools industry toward global competitiveness.

Modular architectural approach has been an important perspective in product innovation research. In this study, we have tried to build a basic theory for understanding interface strategies in modular product innovation through a literature review that covers a number of concepts including product architecture, functional modules, internal and external interfaces, product platforms and families. Based on a product's internal and external dimensions and openness of interface, we construct a strategic matrix of interface possibilities in modular product innovation. We also discuss the technological and organizational requirements for each strategy. Based on case studies of Taiwan's machine tool industry, we examine the practical application of interface strategies. This study finds that existing external interface standards impose limits on product innovation and the innovative efforts tend to focus on internal interfaces and modules, while an open supply network contributes to the high openness between different products in Taiwan's machine tool industry. In addition, we also discuss the architectural essence of Taiwan's machine tool industry, with an expectation that such a discussion may provide the impetus for structural changes in product innovation and supplier networks in the industry.

Effective inter-firm networks are an important competitive advantage in manufacturing. Based on a series of in-depth interviews, three case studies are presented which reflect and are representative of the underlying structure and organisational dynamics of supplier networks in Taiwan's machine tool industry. Basic organisational patterns include lead firm networks shaped like stars, rings and tiers. Multi-centred networks of small firms also play an active role in the industry. Factors influencing network shape include the capabilities and values of member companies, business demand and industry competition. In particular, a combination of economies of scale due to increasing product volume and greater trust stemming from an accumulated history of successful business interaction seem fundamental to changes in network structure.

We investigate what kind of competitive pressure induces existing firms to engage in more intensive innovation activities. We examine two types of competitive pressure: a price decrease in competitive fringe firms and a quality improvement therein. We use an oligopoly model with vertical differentiation to investigate this question. We show that a decrease in the exogenous price of competitive firms induces the two existent leading firms (one high-quality firm and one mid-quality firm) to engage in quality investments more if the ex ante quality level of the high quality product is large enough; otherwise, only the mid-quality firm engages more in quality investment. We also show that an increase in the exogenous quality level of competitive firms diminishes the incentive of the mid-quality firm to engage in quality investments.