IDEAS home Printed from https://ideas.repec.org/a/inm/ormsom/v26y2024i1p271-290.html
   My bibliography  Save this article

The Strategic Role of Supplier Learning

Author

Listed:
  • Long Gao

    (School of Business, University of California, Riverside, California 92521)

  • Mohammad Ebrahim Nikoofal

    (Ted Rogers School of Management, Toronto Metropolitan University, Toronto, Ontario M5B 2K3, Canada)

  • Wei Zhang

    (School of Management, Zhejiang University, Hangzhou 310058, China)

Abstract

Problem definition : We study a procurement problem, where the supplier holds superior cost information and can learn to improve efficiency over time. Despite its prevalence, the supply chain literature provides limited guidance on how to manage learning suppliers with evolving private information. Methodology/results : We use mechanism design. We show that supplier learning has both efficiency and agency effects, it can induce countervailing incentives, and the agency effect can overwhelm the efficiency effect. As a result, (i) supplier learning can hurt profits, (ii) information asymmetry can improve efficiency, (iii) production distortion can go upward, and (iv) ignoring the agency effect of learning can mislead contract design and inflict severe losses. Managerial implications : Our results suggest that previous studies may have overlooked the downside of learning and overestimated the harm of information asymmetry. Moreover, our results help explain when and why firms should overproduce output and disclose private information voluntarily. By highlighting the strategic role of supplier learning, this study sharpens our understanding of supply chain management.

Suggested Citation

  • Long Gao & Mohammad Ebrahim Nikoofal & Wei Zhang, 2024. "The Strategic Role of Supplier Learning," Manufacturing & Service Operations Management, INFORMS, vol. 26(1), pages 271-290, January.
    • Handle: RePEc:inm:ormsom:v:26:y:2024:i:1:p:271-290
    DOI: 10.1287/msom.2021.0285
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/msom.2021.0285
    Download Restriction: no
    File URL: https://libkey.io/10.1287/msom.2021.0285?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormsom:v:26:y:2024:i:1:p:271-290. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.