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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.

The development of the global athletic shoe industry has undergone rise and fall in America, Japan, Korea, and Taiwan over the last 40 years or more. Taiwanese enterprises have led Taiwan and China's footwear growth from production to product development since 1990 and they have built up a long-term cooperative relationship with international brand companies. Furthermore, Japanese management technology was introduced in 2000. Factories in China implemented the lean production system and moved toward target cost management. Taiwanese enterprises have not only succeeded in collaborating with the European, American, and Japanese brands to manufacture in China, but they have also replaced the Japanese footwear factories and taken the lead from Korean manufacturers. This article examines how Taiwanese enterprises compete and collaborate with leading brand companies, while reviewing the literature and constructing an analytical framework based on two axes: manufacturing organizational capability and partner relationship. Observations will include the most recent cases of leading brands in America and Japan, Nike and Asics, as well as their respective Taiwanese-owned shoe firms in China, with the aim of uncovering the reasons for their superior position. Findings show that the competitive capability of Taiwanese-owned shoe firms comes from introducing Japanese management technology to strengthen their manufacturing organizational capability and building up partnerships with brand companies. Both factors interact and mend the product value chain gap to create advantages for original equipment manufacturing/original design manufacturing. It is important to upgrade capabilities independently, while maintaining long-term cooperation and learning with partners.

PurposeThis case aims to examine how Taiwan's bicycle industry has persevered against increasingly severe competitive challenges from Chinese companies. The Taiwan firms have created innovative, high value‐added products and transformed the organization of production through a new version of cooperative competition. The case seeks to show how established producers may counter‐attack when faced with the strong challenges of low‐cost competitors.Design/methodology/approachThe authors, all experts on Taiwanese manufacturing and business processes, examine the characteristics of an integrated, co‐innovative, cooperative supplier network, named the A‐Team.FindingsThe paper finds that, broadly speaking, integrated, co‐innovative supplier networks have two basic features that differentiate them from traditional modular, symbiotic supplier networks. First, whereas traditional supplier systems have emphasized cost control, integrated, co‐innovative supplier networks appear to be more focused on value creation through co‐innovation. Secondly, by adopting a more integrated network structure, such supplier networks appear to have a greater ability to resist imitation.Practical implicationsBased on Taiwan's bicycle industry, there seem to be five basic conditions for establishing a successful integrated, co‐innovative supplier network. There must be: a strong awareness of industry risks and/or prospects; trust among network members; long‐term interactive cooperative relationships; a desire to learn, and extensive communication, including substantial face‐to‐face communication.Originality/valueFor producers faced with the challenge of coping with the threat of low‐cost competition, co‐innovation within an integrated supplier network may be quite helpful. By working to coordinate the innovation efforts of assemblers and suppliers, Taiwan's A‐Team has laid a good foundation. While some initiatives are still in the early stages, as a result of the A‐Team's work to date, A‐team membership has increased and the group has received considerable recognition both at home and abroad.

PurposeThe purpose of this article is to better understand Japanese manufacturing in mainland China and clarify how traditional Japanese subcontracting has changed and is changing to fit the economic environment there.Design/methodology/approachThis article looks at the subcontracting practices of the Toyota Group along with the evolution of Shanghai Koito's operations in mainland China. The research for this study was conducted from 1995‐2003 and is based on visits to Toyota's China headquarters in Beijing and its technical center in Tianjin, Shanghai Koito Company, Sichuan Toyota, and Tianjin Toyota.FindingsWhen Japanese style subcontracting in mainland China is compared with that of traditional Japanese subcontracting, a stark contrast is revealed. First of all, it is clear that Japanese‐affiliated enterprises in China are moving away from an insular, vertical subcontracting structure dominated by a single assembler. In the new subcontracting system, characteristic features – such as a broad customer base and localization – contrast with earlier features that included a substantial delegation of authority, regulated interfirm competition, and long‐term relations.Research limitations/implicationsThis paper is based on two case studies and so, while its findings may be accurate for the companies in question, helpful for understanding Japan's auto industry in mainland China, and may be more widely applicable, the findings are unlikely to be universally applicable.Practical implicationsWith short‐term guidance corresponding to the needs of localization and the effective use of cheap labor coming to the fore, the examples of Toyota and Shanghai Koito may provide helpful illustrations of the kind of adaptation needed to succeed in mainland China. In particular, by moving away from a reliance on its traditional Japanese customers for sales, Shanghai Koito seems to have positioned itself well to avoid the hardship of dwindling sales that other more traditionally oriented Japanese suppliers have begun to face. Moreover, its growing independence may be an important indicator of what the future may look like for Japanese manufacturing.Originality/valueLooking at the history of industrial development in East Asia, the adaptation of Japanese business practices to different economies in the region has been an important theme. This study provides an up‐to‐date review of a number of current issues facing Japanese automakers as they develop their operations in mainland China.

Replication can be a powerful strategy for firms, but the replication of organizational practices is not easy, and there exists a real tension between replication and adaptation. This paper looks at the sourcing strategies and supplier networks of three Taiwanese machine tool companies in mainland China to understand the conditions under which replication may be more or less likely to occur. In addition, by viewing the cases as examples of the production network internationalization and by considering the issue of convoy migration in such a context, this paper presents a new way of thinking about the internationalization of industrial networks.

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.