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A Model-Based Theory Creation and Validation of Technology Supply Chains

  • Author(s): Lee, Junghee;
  • Advisor(s): Krishnan, Vish;
  • Shin, Hyoduk
  • et al.

Technology plays an increasingly critical role in various supply chains by endowing products with sought-after capabilities. For these supply chains to perform, both the creation and the reliable supply of technology are necessary. The current dissertation consists of three essays related to this theme.

In the first essay the focus is on a supply chain where there is an innovation opportunity in the upstream supplier. We investigate when the supplier should ask the downstream manufacturer to invest in the supplier’s innovation in return for the procurement contract initiation right. Interestingly, the supplier’s strategy is contingent on the nature of the innovation such as quality improvement and cost reduction.

In the second essay, we study business models for the technology provider that can not only license its proprietary technology but also produce the technology embedded subsystem. A widely used royalty-driven approach has gotten complicated in multi-tier supply chains because there are multiple royalty bases. We characterize the appropriateness of different business models for markets with varying levels of customer diversity and competitive intensity in the supply chain.

In the third essay, the focus is on when a technology supply chain is more reliable. We investigate this question in pharmaceutical drug supply chain, where drug shortages frequently occur due to manufacturing issues. Using the drug shortage history data between 2010 and 2015, we found that increasing competition may not monotonically mitigate or prolong the drug shortage recovery time contrary to common theory predictions. We develop a model and provide a new theory that can plausibly explain the empirical observations.

In summary, this dissertation makes the following contributions. First, it shows how firms in a technology supply chain can productize their innovation andserve lower ends of the market while maximizing profit. Second, it establishes how technologies can be monetized in a supply chain with powerful intermediaries and complementary capabilities. Third, this work shows that sufficient competition in a supply chain is necessary to provide an innovative product to the market in a reliable manner.

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