Limits to networking capabilities: Relationship trade-offs and innovation

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.