The capability of firms to leverage external network relationships strongly supports the development of successful new products and services. Network partners help to shape innovations and pave the road to commercialisation. Yet, despite this considerable knowledge about the importance of networks for innovation, we do not understand how firms embedded with multiple network partners manage competing priorities and associated attention trade-offs to maximise the full innovation potential of these relationships. Gaining insight into this deficit would serve to clarify networking capability theory and challenge its ‘more is better’ truism. To study this, we investigate Australian oil and gas firms' relationships with customers and suppliers, and trade-offs between these channels, to discover the impact upon innovation. We find that, while focused relationships within each channel (deep embeddedness) supports innovation, increasing vertical embeddedness with suppliers and customers simultaneously lowers firms' ability to introduce new products or services. Two findings emerge from our research: first, that there may be organisational limits to the attention span necessary to fully leverage the innovation potential of multiple network partners; and second that increasing vertical embeddedness may lock firms into non-innovative network positions. Findings indicate a strong need for attention-switching capabilities at the firm level.
A robust networking capability is important to innovation in a business-to-business environment, particularly with regard to integrated products. These innovations involve sophisticated and complex blends of disparate technological knowledge and componentry provided by many specialist firms (Davies, Brady, & Hobday, 2007; Freytag & Young, 2014; LaPlaca, 2014; Storbacka, 2011). Delivery of new products or services in this environment involves being well-versed in network reconfiguration in order to address customer-specific requirements for new products (Mitrega, Forkmann, Ramos, & Henneberg, 2012; Ritter, Wilkinson, & Johnston, 2004). Networks are important to innovation because they enable the exchange, transfer and recombination of new knowledge and ideas (LaPlaca, 2014). Networks are particularly good at supporting the communication of fine-grained and tacit forms of knowledge associated with new products (Jones, Hesterly, & Borgatti, 1997; Rost, 2011; Uzzi, 1997). For instance, strong customer networks help focal firms to clarify technology requirements, often via co-development partnerships (Ritter et al., 2004). Similarly, strong supplier networks have a multiplicative effect on the technologies that focal firms can draw upon to develop their own solutions (Davies & Hobday, 2005; Ritter et al., 2004). Evidence suggests that close-knit customer and supplier networks are particularly beneficial to creating new products and services in a range of integrated product industries, ranging from locomotives to telecommunication systems and commercial aircraft (Cacciatori, Tamoschus, & Grabher, 2011; Davies & Hobday, 2005, Davies et al., 2007). However, there has been little consideration of the trade-offs or interactions associated with being involved in multiple connections in an industrial network. We use the attention-based view of the firm and lock-in theories to investigate these problems (Ocasio, 1997; Sydow, Schreyögg, & Koch, 2009; Whitley, 2002). In the attention-based view of the firm, managerial attention is seen as limited, both in direction and intensity (Li, Maggitti, Smith, Tesluk, & Katila, 2013; Ocasio, 1997). Instead of paying full attention to every potential network partner, firms exhibit attention patterns that are shaped by the particular problems that they face at that moment (Ocasio, 1997, p. 189).