A firm’s supply chain faces challenges relating to reducing operational cost while at the same time producing innovative products and services to meet consumers’ current and potential demand. One important phenomenon in the field of innovation research is the concept of innovation capability. The purpose of this thesis is to empirically explore innovation capability as a firm interacts with its supply chain members. In order to achieve the above stated purpose, the thesis attempted to answer the overarching research question: How does a focal firm’s interaction with its supply chain members affect its innovation capability?

To answer the research question, a multiple method approach was adopted. This consists of two qualitative case studies, conceptual analysis, a quantitative study of a sample of 117 managers and systematic literature review (SLR). First; we used the systematic literature review (SLR) method to identify important innovation capability factors and theories applied in innovation capability studies. Second, multiple case studies were used to further investigate innovation capability in a supply chain context. Third, quantitative survey-method was used to explore innovation capability measures in the context of the supply chain.

Five individual papers are presented in this thesis. The findings are summarised and presented in the cover (“kappa”) of the thesis. The findings revealed that focal firms’ innovation capability was influenced as a result of a focal firm’s interaction with its supply chain members. In addition, technological embeddedness influences innovation capability of the focal firms.