The purpose of this paper is to explore the linkage among three factors – shareholder‐manager relationships (or corporate governance), customer supplier relationships, and innovation, for two groups of UK firms in the speciality chemicals and electrical equipment industries.
This research was exploratory. In total, 12 companies were studied in depth. The level of innovation was measured through a questionnaire and interviews were carried out with managers, important customers and suppliers. A comparison of management practices was established between the more and the less innovative companies.
This research finds a close connection between shareholder‐manager relationships, customer and supplier relationship management and innovation. The firms subject to arms‐length relationships with shareholders (as UK‐based public limited companies) had more distant relationships with suppliers and customers and poorer innovative performance.
The validity and reliability of the conclusions require the undertaking of quantitative studies. Other aspects apart from those explored could affect the level of innovation of companies.
In the more innovative companies, strategic and investment plans tend to look to the long‐term (five years plus). And, customers and suppliers are involved from the beginning in the development of new products and production processes. Lack of shareholder engagement strongly inhibits “long‐termist actions”, which include the development of such close relationships with customers and suppliers.
This paper is the first to look at the possible link between corporate governance, customer and supplier relationship management and the level of innovation and has research and practical implications.
