The Eclipse 500 Very Light Jet

Presidente: Prof. Fernando José Parracho Lau Orientador: Prof. Rui Miguel Loureiro Nobre Baptista Vogal: Prof. Carlos Manuel Pinho Lucas de Freitas

ACKNOWLEDGEMENTS

Firstly I would like to thank my supervisor Professor Rui Baptista, of IST, for the support, freedom and confidence he gave to me and all his hard work reading the draft version of my thesis and helping me making it final. His comments, literature, suggestions, enthusiasm and encouragements were very important for my work. I found it very valuable to be able to learn from his experience throughout my writing.

To Professor Marc Reunis, of TUDelft, it is very difficult to express how grateful I am. Marc was the lecturer of Purchasing Management at TUDelft, where my work about the Eclipse 500 started. His enthusiasm made me believe in the potential of my idea to explore the supplier involvement this aircraft. After that, his commitment and careful reviewing of my work let me learn a lot about how to properly write a scientific paper. Furthermore, Marc was kind enough to help me on several occasions in the early, and perhaps most difficult, stages of this thesis (without any benefit or obligation to do so), when I had to define its structure and goals, even though he was in The Netherlands and I was in Portugal.

I would also like to thank Mr. Rich Shepherd, from Eclipse Aviation, for answering and distributing my questionnaires to his colleagues thus making it possible to obtain the direct contribution of Eclipse Aviation supply chain management employees. This contribution was essential for the quality of the results of my research.

To Professor Arménio Sá I thank for all the privileged information about the Eclipse 500 he gave to me that I would not have ever been able to gain access to otherwise and made my understanding of this airplane much deeper.

To my extended family I would like to thank for the opportunity of studying and reaching the end of my Master’s. More specifically to my parents for paying for it, supporting and encouraging me along my academic life, and giving me the opportunity to study abroad; to my aunt Zé for the quiet and scientific feel of her office; to my grandparents for the advice and the opportunity to work in a peaceful, beautiful and calm place; to Nana for bearing my terrible morning moods; and to Mena and Carlos for making me keep my options open when I was so sure I did not want to do a Masters’ thesis.

Finally I would like to thank my friends for balancing the long and hard days of writing with frequently even more tiring but much more fun and amusing experiences. To Victor, who besides welcoming me in his country, was the first person to ever speak to me about “this amazing little jet that is gathering much interest in the US”. To Claudia, Andrew and Luca (and the rest of the 3 rd floor group) I thank for five intense months of shared life, where I both enjoyed and learned a much more than I would ever have imagined possible. To Margarida, Filipa, Raquel and Joana for being the everlasting group, night after night, week after week, and for years now, with whom I share a large set of great moments and memories, and the certainty that many more are yet to come.

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ABSTRACT

The Eclipse 500 Very Light Jet (VLJ), developed by Eclipse Aviation, is a new type of personal jet that is expected to revolutionise the market. Its sale price and operating costs are historically low and a very low time to market and high number of advance orders were achieved; furthermore, it is an example of a radical innovation developed by a new venture. This thesis is organised as a case study of supplier involvement in the development of the Eclipse 500. It assesses hypotheses concerning supplier involvement and time to market, development cost savings, suppliers’ specific investments and qualification of supplier abilities. A research question about other effects of supplier involvement is also answered.

Selected employees from Eclipse Aviation responded to two questionnaires; a number of relevant press releases from this manufacturer were also analysed through a framework of supplier involvement. It was concluded that a negative relationship exists between supplier involvement and time to market and that a positive one is present between supplier involvement and development cost savings. The qualification of supplier abilities and supplier specific investments have had a positive relationship with the extent of supplier involvement in this case. Eclipse Aviation was more involved with the suppliers chosen for the quality of their products and supplier involvement was important in reaching final product quality goals. Further research is possible by performing a multiple case study of Eclipse Aviation and its main competitors and see if the conclusions reached in this work still hold.

Keywords: Supplier involvement; Radical innovation; New venture; Eclipse 500; Development cost savings; Time to market.

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RESUMO

O Eclipse 500 Very Light Jet (VLJ), desenvolvido pela Eclipse Aviation, é um novo tipo de jacto particular que potencialmente revolucionará o mercado. O seu preço de venda e os seus custos de operação são historicamente baixos e foram atingidos tanto um baixo “time to market” como um grande número de encomendas adiantadas. Adicionalmente, é um exemplo de uma inovação radical desenvolvida por uma “new venture”. A presente tese construiu-se como um estudo de caso sobre o envolvimento de fornecedores no desenvolvimento do Eclipse 500. Foram testadas hipóteses sobre vários efeitos previstos do envolvimento de fornecedores no desenvolvimento deste produto.

Empregados seleccionados da Eclipse Aviation responderam a dois questionários; press releases deste fabricante foram também analisados através de uma framework sobre envolvimento de fornecedores. Concluiu-se que existe uma relação negativa entre envolvimento de fornecedores e “time to market” e que existe uma relação positiva entre envolvimento de fornecedores e redução dos custos de desenvolvimento. A qualificação de capacidades dos fornecedores e seus investimentos específicos tiveram ambas uma relação positiva com o nível de envolvimento de fornecedores neste caso. A Eclipse Aviation esteve mais envolvida com os fornecedores escolhidos pela qualidade dos seus produtos e o envolvimento com os fornecedores foi importante para atingir as metas de qualidade para o produto final. Para investigação futura sugere-se um estudo de caso múltiplo da Eclipse Aviation com os seus principais competidores, averiguando se se mantêm válidas as conclusões obtidas neste trabalho.

Palavras-chave: Envolvimento de fornecedores; Inovação radical; “New venture”; Eclipse 500; Reduções em custos de desenvolvimento; “Time to market”.

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TABLE OF CONTENTS

Chapter 1 - INTRODUCTION AND RELEVANCE ...... 1 1.1 INTRODUCTION ...... 1 1.2 RELEVANCE ...... 2 1.3 RESEARCH PROBLEM ...... 3 1.4 THESIS OUTLINE ...... 3 Chapter 2 - THEORETICAL FRAMING ...... 5 2.1 BACKGROUND ...... 5 2.1.1 Airlines and their Limitations ...... 5 2.1.2 Current On-Demand Alternatives ...... 7 2.1.4 Supply Goods and Supplier Classification ...... 9 2.2 RADICAL AND INCREMENTAL INNOVATION ...... 11 2.2.1 Innovation Classification in the Literature ...... 12 2.2.2 Descriptions of Radical and Incremental Innovation ...... 14 2.2.3 Radically and Incrementally Innovative Product Development and Corp. Strategy . 16 2.3 NEW VENTURES AND RADICAL INNOVATION ...... 18 2.4 AN EXAMPLE OF RADICAL INNOVATION IN A NEW VENTURE: THE DEVELOPMENT OF THE ECLIPSE 500 ...... 20 2.4.1 Eclipse Aviation and the Eclipse 500 Very Light Jet ...... 21 2.4.2 Classifying the Eclipse 500 as a radical innovation conducted by a new venture .... 23 2.5 EARLY SUPPLIER INVOLVEMENT: A FRAMEWORK ...... 26 2.6 SUPPLIER INVOLVEMENT IN A RADICAL INNOVATION BY A NEW VENTURE ...... 32 2.7 RESEARCH PROBLEM, QUESTIONS AND HYPOTHESES ...... 35 2.7.1 Research Hypotheses ...... 35 2.7.1.1 – Supplier involvement and low time-to-market ...... 36 2.7.1.2 – Supplier involvement and development cost reductions ...... 36 2.7.1.3 – Suppliers’ specific investments and level of supplier involvement...... 37 2.7.1.4 – Qualification of supplier abilities and level of supplier involvement ...... 37 2.7.2 Research Questions ...... 38 2.8 RESEARCH METHODOLOGY ...... 39 2.8.1 Case studies ...... 39 2.8.2 Reasoning and Research Paradigms ...... 42 2.8.3 Quality Assessment of the Research ...... 44 2.8.4 Experimental Research Methodology Used in this Thesis ...... 46

vii 2.8.4.1 – The Choice of a Single-Case Study Approach ...... 46 2.8.4.2 – Research Paradigm and Quality Assessment ...... 46 2.8.4.3 – Nested Cases ...... 48 2.8.4.4 – Information Gathering ...... 49 2.8.4.5 – Testing Hypotheses and Answering Questions ...... 50 Chapter 3 - RESULTS AND ANALYSIS ...... 52 3.1 THE QUESTIONNAIRES ...... 52 3.1.1 Respondents and Replies ...... 52 3.1.2 The First Questionnaire ...... 54 3.1.2.1 – General Section ...... 54 3.1.2.2 – Specific Sections ...... 56 3.1.3 The Second Questionnaire ...... 59 3.1.3.1 – General Section ...... 59 3.1.3.2 – The Specific Sections ...... 60 3.2 THE PRESS RELEASES ...... 62 3.3 ANALYSIS OF THE HYPOTHESES AND RESEARCH QUESTIONS ...... 65 3.3.1 Research Hypotheses ...... 65 3.3.1.1 – Supplier involvement and low time-to-market ...... 66 3.3.1.2 – Supplier involvement and development cost reductions ...... 68 3.3.1.3 – Supplier specific investments and level of supplier involvement ...... 69 3.3.1.4 – Qualification of supplier abilities and level of supplier involvement ...... 71 3.3.2 Research Questions ...... 72 3.3.2.1 – Other outcomes from supplier involvement ...... 72 Chapter 4 - DISCUSSION AND CONCLUSIONS...... 76 4.1 SUMMARY ...... 76 4.2 MAIN RESULTS ...... 77 4.3 DISCUSSION AND CONCLUSIONS ...... 77 4.4 FUTURE WORK ...... 81 References ...... 82 ANNEXES ...... 85

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INDEX OF TABLES

Table 2.1 – Relative rankings of development activities in terms of relevance to product success (X. M. Song & Montoya-Weiss, 1998) ...... 17 Table 2.2 – Activities inside the area of development management...... 29 Table 2.3 – Activities inside the area of supplier interface management...... 29 Table 2.4 – Activities inside the area of project management...... 30 Table 2.5 – Activities inside the area of product management...... 31 Table 2.6 – Results of hypothesis testing of M. Song & Benedetto (2008) about suppliers’ involvement in radical innovation by new ventures...... 34 Table 3.1 – Response rate in both questionnaires...... 53 Table 3.2 – Summary of data gathered from the press releases about the four nested cases in study...... 65 Table 4.1 – Results of hypothesis-testing ...... 77

INDEX OF FIGURES

Figure 2.1 – Annual net profit or loss as a percentage of total revenue of ICAO member airlines 1950- 2006 (Air Transport Association, 2008) ...... 6 Figure 2.2 - Plane used to classify relationships regarding the motivation of the seller and the buyer. (Dwyer & Tanner, 2006) ...... 10 Figure 2.3 – The map of Henderson & Clark (1990) to classify innovation...... 13 Figure 2.4 - A dichotomous scale used to classify innovation throughout this work...... 16 Figure 2.5 – The Eclipse 500 VLJ and its electronically advanced glass cockpit...... 21 Figure 2.6 – The four management areas that make supplier involvement possible...... 28 Figure 2.7 – Diagram of the relative position of the hypotheses and the variables they refer to...... 38 Figure 2.8 – The four types of validity of Trochim (2005)...... 44 Figure 2.9 – General schematics of the research methodology used in this thesis...... 48

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For he that gets hurt Will be he who has stalled There's a battle outside And it is ragin'. It'll soon shake your windows And rattle your walls For the times they are a-changin'.

(Bob Dylan)

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xii Chapter 1 - INTRODUCTION AND RELEVANCE

1.1 INTRODUCTION

This thesis focuses on the Eclipse 500 Very Light Jet (VLJ), more specifically on selected aspects of its development process. Eclipse Aviation, its manufacturer, expects with this aircraft, first delivered in 2007 (Eclipse Aviation, 2007d), to create a new market segment inside the business aviation market by leveraging its reduced cost base and high degree of flexibility.

The demand for air travel is rising due to a variety of factors, including the internationalisation of businesses as part of the globalisation process. Airlines are trying to take advantage of that demand while at the same time being pressured by stakeholders to be as efficient as possible (Holloway, 2003), namely due to the very high amounts of capital involved in an industry that is characterised by very low profit margins (Doganis, 2002). Several of the measures towards achieving that efficiency resulted in a service that is not so satisfactory to certain customers, in particular due to an increase in travel times and reduction of flexibility.

Business jets offer a service that provides a high amount of flexibility and at the same time greatly reduced travel time. If a certain businessman wishes to go from his company headquarters to a meeting he may fly the business jet from his local airport to the local airport nearest to the meeting place, arrive just before the meeting and leave immediately when he is ready. Using a regular airline, the passenger is likely to need connecting flights using busier airports, besides being bound by the airline’s schedules. However costs of using business aviation are much higher than the ones of regular airlines, so just a small amount of top executives in affluent companies are able to use this service. Fractional ownership concepts developed by companies such as NetJets have reduced the costs of using business jets for companies (when compared to the ownership of a business jet by a company) but these remain nonetheless too high for the majority of potential users.

Eclipse Aviation, founded in 1998, started in 1999 the development of an aircraft that intended to change forever the market of personal jet transportation. According to a press release, “The company is applying advanced electronics systems, manufacturing and business practices to produce aircraft that cost less than a third of today’s small jet aircraft, will be safer and easier to operate than those of today, and have the lowest cost of ownership ever achieved in a jet aircraft” (Eclipse Aviation, 2007f). The Eclipse 500, seating in standard configuration 6 persons and with a range of 1300nm (assuming 4 persons on board) has a purchase price of 42% less and a total operating cost per hour 35% lower

1 than the Cessna Mustang, an aircraft very similar to the Eclipse in terms of technical specifications (Eclipse Aviation, 2006a, 2007b).

Eclipse Aviation managed to greatly reduce the costs of operating a business jet on its Eclipse 500 VLJ. Furthermore the aircraft was also put in the market in a very short time and with a large number of advance sales when compared to typical values for the jet aircraft industry. New venture companies (for instance DayJet (2007a) and OurPLANE (2007)) were created by independent entrepreneurs to take advantage of the innovativeness of the Eclipse 500 VLJ and its potential to enable new business models to be created that could bring the advantages of business aviation to more potential customers, by lowering the costs.

Results of previous research done by the author (Boavida, 2008) suggest that one of the factors that enabled Eclipse Aviation to achieve the high performance of this project (measured in terms of the low time-to-market and high number of advance orders) may lie in its relationship with the suppliers. Early supplier involvement is likely to have been present and to have played a major role in achieving these goals. The investigation and deeper understanding of Eclipse Aviation’s relationship with its suppliers is valuable for reference in future new product development projects that will be able to build on the knowledge gathered by Eclipse.

1.2 RELEVANCE

With such an impressive set of facts regarding the development process of this aircraft, questions arise regarding how Eclipse Aviation managed to reach this performance. As stated before, previous research suggests that the relationship of the company with its suppliers played an important role here.

According to several sources (for example Wagner & Hoegl (2006)), companies show a trend in recent years to spread their innovation process across their boundaries, often involving people from outside the company such as the suppliers in a search for better performance. This is motivated by attractive perspectives such as achieving parallel development of some components (and thus lowering the development time) and using each supplier’s expertise in its area of business to obtain a more competitive product.

As stated before, Eclipse Aviation was started in 1998 specifically with the development of the Eclipse 500 in mind. Its situation is different from the one of an established company that decides to upgrade one of its existing products or develop a new product for a new market. One of the major differences is that a failure in the development of the first product can be fatal for the start up company as it has no resources to bear the losses caused by that failure. On the other hand these companies can be much more flexible than established ones, this being an advantage for innovation processes.

2 Few authors have delved into the issue of supplier involvement in innovation processes for new ventures. New ventures are, according to Song & Benedetto (2008), much more dependent on suppliers for required resources than established companies. These authors also state that smaller firms are turning to their suppliers as potential investors, both in terms of financial investments and of know how investments.

Another interesting characteristic of the Eclipse 500 VLJ project is that the aircraft is not an incremental innovation but a radical one. An incremental innovation is one that upgrades an existing product and involves minor capital investments and less risk when compared to a radical one. These projects are characterised by low risk and uncertainty, together with a short payback period. Regarding radical innovations, several definitions may be found in the literature; for example according to O’Connor & McDermott (2004) a radical innovation is one that bears high uncertainty and risk while having the potential to greatly influence existing markets and thus bring returns on the long run to the innovating company.

The study of Eclipse Aviation’s radical innovation process for the development of the Eclipse 500 VLJ, more specifically its relationship towards the suppliers, may bring more insight into the field of supplier involvement in radical innovations within new ventures and shed light on practices that may be useful both for further research and for innovation managers of other companies (or even Eclipse itself) to repeat the success that this project has had in future endeavours.

1.3 RESEARCH PROBLEM

The features and research goals presented above may be synthesised into a research problem that constitutes the topic of this thesis: the present work aims to study the supplier involvement in the development process of the Eclipse 500 VLJ as a case study of supplier involvement in a radical innovation done by a new venture. This problem is addressed via the establishment and testing of research hypotheses and the answering of a research question.

1.4 THESIS OUTLINE

This thesis will be divided into five chapters plus a references section. The present chapter has given an introduction to the topic of this thesis and also showed why this topic is relevant.

Chapter two, entitled “Theoretical Framing” will begin by providing background on concepts that are relevant for the understanding of the core issues dealt with in the thesis. The theoretical framing itself comprises discussion about radical innovation and new venture development, and also a model of supplier involvement. The chapter culminates by establishing a research question and hypotheses, and by further providing an explanation of the research methodology used in the empirical analysis.

3 The third chapter, “Results and Analysis”, illustrates the realisation of the field research, explaining the instruments used for data collection, its results, and an assessment on whether or not the expected outcomes of supplier involvement are in fact present in the studied case of the Eclipse 500 VLJ project.

The fourth chapter, “Discussion and Conclusions” discusses the research project carried out, bringing back the research question and the methodology, and using the knowledge acquired through empirical field work to answer the research question. It also analyses the limitations of the study and discusses what could have been done different, and also what were the constraints that limited the validity and quality of this study. The thesis ends with suggestions for further research and managerial practices in this field of supplier involvement in radical innovation by new ventures.

4 Chapter 2 - THEORETICAL FRAMING

2.1 BACKGROUND

Chapter one provided an introduction to the role played by supplier relationships in the development of a radical innovation – the Eclipse 500 – and established the relevance of the problem. In the present section the background required for the understanding of the rest of this work is drawn out. The approach will start by the most common system of air transportation (scheduled airline service) and its limitations. After this an overview of the current on-demand service alternatives available is made leading to the positioning of the Eclipse 500 VLJ. The section ends with background general information on supplier management and the different types of suppliers that a company can have, which is fundamental for the later analysis of supplier involvement in radical innovation projects.

2.1.1 Airlines and their Limitations

Nowadays the most popular form of air travel is the use of airlines. In the beginning of commercial aviation airlines were created by nations to satisfy the travel needs of their citizens. Despite previous existence of a small amount of scheduled air transports, the Chicago Convention, which originated the International Civil Aviation Organisation (ICAO) and was signed in 1944, laid down the foundations of international civil air transport. Afterwards, in 1947, the International Air Transport Association (IATA) was formed by airlines to ensure that competition was fair in this international business and also that the prices practiced by different companies had some degree of uniformity.

The business of commercial aviation regulated by the Chicago Convention and IATA was according to some authors (e.g. Doganis (2002)) highly regulated and unlike that of any other business. Operating in such an environment is one of the challenges posed to airline managers. The same author states that one of the reasons leading to the current regulatory regime is the necessity of advanced technology in order to achieve adequate safety standards. Economic regulations are also of relevance, as with the advent of commercial air transportation the national airspace of countries became a valuable resource, and countries had to exchange agreements to ensure a fair usage by all of each other’s airspace.

5 The “perishability” of the airline product has also been one of the difficulties of airline managers. A particular aircraft has a fixed capacity, and from the moment that it closes its doors for departure all the empty seats have a value of zero; thus they are said to be perishable, according to Holloway (2003). Since airlines obtain the largest part of their revenues through the sale of tickets, seats left empty are generally a source of lost business for the company. Consequently the need to accurately forecast demand and synchronously manage output and capacity is a major challenge to airlines, as it is bound to determine its success or failure.

For a relatively new and growing industry like the air transport industry in the middle of the 20 th century, its marginal and cyclical profitability was certainly contradictory. The above stated challenges are certainly in the origin of this characteristic. Figure 2.1 shows the net profit or loss of ICAO airlines throughout the years as a percentage of the total revenue.

Net profit or loss as a percentage of total revenue (1950-2006) 7% 6% 5% 4% 3% 2% 1% 0% -1% -2% -3% -4% -5% 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Figure 2.1 – Annual net profit or loss as a percentage of total revenue of ICAO member airlines 1950-2006 (Air Transport Association, 2008)

The graph shown in the figure depicts the cyclicality of the industry referred in the above paragraphs. Periods with an average duration of five years of good performance are followed by periods of similar average length of poor performance. It should be noted that the continuous growth of the industry is not shown in these numbers, as they are percentages of total revenue.

Another important characteristic of the data shown in Figure 2.1 is that even though the duration of the cycles is roughly constant the amplitude of the performance difference becomes larger throughout

6 the decades. The second lowest performance values are for the crisis following 1990, that partially matches the First Gulf War. The positive period shown ending in 2000 was expected to lead to an era of even worse performance of the industry. As a matter of fact, that period turned out to be the worst ever, with the attacks of September 11 th 2001 plunging the airlines into a very large demand crisis (Ito & Lee, 2005). Due to the “perishability” effect explained above and also to the difficulty of airlines to rapidly reduce capacity several governments had to help their national airlines and some major companies were declared bankrupt (for example Swissair and Sabena, according to Doganis (2002)).

In the aftermath of this crisis airlines are at the time of writing in an era of profit growth; a particular segment that has enjoyed very good performance has been the low cost segment. These airlines aim to provide a no-frills service with a highly reduced cost base and in operating only the most profitable routes. For instance easyJet, one of the major players in that segment in Europe, has obtained an average net profit of 5.78% of its total revenue in the period between 1999 and 2006 (according to the annual reports distributed in the company’s website), a value that is much higher than most of the values shown in Figure 2.1. This has placed even more pressure on traditional airlines to reduce their costs as a way of remaining competitive in the markets penetrated by the low cost companies (majorly medium haul services inside Europe and the United States).

In order to survive in this ever more challenging market certain airlines have been for some years forming global alliances where they cooperate with each other in a pursuit of better results. Traffic is shared between allied airlines, that are even allowed to sell tickets to a flight operated by one of their partners, sporting the flight codes of all the partner airlines. This particular freedom constitutes the concept of code-sharing. Furthermore, since larger aircraft usually yield a lower cost per air-seat- kilometre than smaller ones allied airlines have been implementing a strategy of having very large airport HUBs connected by large aircraft, and which are fed by smaller aircraft taking passengers from their home and destination airports to the HUB’s serving the regions (Holloway, 2003). This is called the hub-and-spoke network model, and aircraft such as the Airbus A380 have been developed with this particular type of networks in mind. An effect of the hub-and-spoke network model is that travelling between two points often takes much more time and effort than it would if the trip would be made on a point to point, non-stop flight basis. Wealthy passengers have then turned more and more to the on-demand alternatives, bypassing busy HUBs and making their own schedule, in exchange for a premium price; the steady growth of non-scheduled air transport companies, such as NetJets, is an indicator of this fact.

2.1.2 Current On-Demand Alternatives

There has always been a high end market segment for private and business aviation, where an individual or a company owns a private aircraft and hires a crew to operate it to match their needs. It is clear that the cost of this kind of transportation policy is much higher than the use of airline services, but it comes together with greatly enhanced flexibility, time efficiency, and quality of service

7 (Sheehan, 2003). Due to its high costs, this kind of transportation alternative has only been available to the highest income passengers.

The foundation of NetJets in 1986 represented a significant change in the on-demand air travel market. The founders of this company realised that for many possible customers the ownership of a private jet aircraft would bring a large amount of benefits, but that the costs remained still too high (NetJets Inc., 2007b). The responsibility of having to hire a flight crew and cope with management and storing expenses were also negative factors in owning an aircraft, as several of these customers are high profile executives in industries that do not involve aviation.

With the concept of fractional aircraft ownership, pioneered by NetJets, customers could buy a fraction of the time of a private aircraft corresponding to the number of hours they intended to fly, for a fraction of the total cost. In addition to selling these fractions, NetJets committed to have the aircraft ready for every customer at his command, with a mandatory anticipation that ranged from 24 hours to 4 hours in the high end products.

This company experienced a steady growth rate, as more and more customers found out that they could bypass the ever more difficult world of airline travel, that at the same time was implementing the hub-and-spoke model referred above, for a premium price above the first class tickets, but also much lower than in the option of total ownership. NetJets started operations in 1986 with six aircraft in the United States and is now a global enterprise, spread in six companies with a combined fleet of more than seven hundred aircraft (NetJets Inc., 2007a). This company has in 2001 started a programme in which customers who do not fly enough hours per year to take advantage of a fractional ownership may buy a card with a minimum of 25 hours in the aircraft class of their choice (NetJets Inc., 2007a, 2007c).

Other companies are currently operating in this market using business models that are similar to NetJets. However, since NetJets was the first company to invest in these concepts and its business model is not very different from later founded companies it is unnecessary to speak about them.

Despite a considerable reduction when compared to total ownership, the costs of these services are still very high for some potential customers to pay. For example, the lowest priced offer currently available from NetJets is the 25 hour card in the Cessna Citation Bravo class priced at 129,000€. This provides 24 hour availability of the aircraft in any European airport and coverage of every cost associated with the flight (NetJets Inc., 2007c).

The founders of Eclipse Aviation saw a market currently not even served by these lowest priced alternatives, where a very-light-jet could be built and subsequently operated on an extremely low cost basis to create a new market segment in the business and private aviation market. The Eclipse 500 VLJ, built to serve this market, is introduced and analysed in subsection 2.4.1.

8 2.1.4 Supply Goods and Supplier Classification

Typically companies do not develop and build their products from scratch; instead they buy goods from other companies that they can modify to a certain extent and integrate to build their own product. Additionally companies buy goods that are just required for the completion of the development project itself, and that will not be a part of their products; one example is the acquisition of computers for design purposes. The range of goods that are bought from suppliers range from pencils and rubbers costing a few cents to major complex products with implications in the long term future of the company, such as an engine bought from an engine manufacturer.

Furthermore, manufacturers have to think of the role that the product they are developing will play in their customer’s lives or businesses and shape it to meet the buyers’ needs to the best possible extent.

Even given its low cost compared to the competition in the light jet market, the Eclipse 500 VLJ still sells for roughly 1.2 million Euros. Each jet that a company purchases, even if it is a business customer, will represent a high amount of capital expended, and will often have a strategic role in the company that acquires it. In this kind of purchases the relationship between the buyer and the supplier is of greater importance to ensure sales.

Kotler (2004) shows in his book the definitions of four categories of products that companies may have to purchase; those definitions will be explained below together with some possible connections to the case of Eclipse Aviation.

i. Routine products have both low cost and value and thus the buyers look for the lowest possible price for the order; suppliers can have contracts in order to continuously supply their goods to each customer. These products are also called commodity products, and represent the case of the above stated pens and pencils.

ii. Key products are the ones that have both a high value and a high cost to the manufacturer, but a low supplying risk. These products can be produced in a high number of companies; the buyer will compare the various offers and each supplier will try to show that his product will sport the lowest ownership cost.

iii. Strategic products have high value, cost, as well as a high risk. Here the buyer will look for a respected supplier which he believes to be reliable. In this kind of products co-development and co-investment by the supplier and the buyer are possible and can lead to cost savings and performance increases to both parties if used properly. In the case of the Eclipse 500, its engines developed by Pratt & Whitney specifically for the Eclipse 500 (Eclipse Aviation, 2003) are certainly strategic products.

9 iv. Bottleneck products are those that have a relatively low cost and value to the supplier but sport a high supply risk. In these products the buyer will look for a supplier that can ensure continuous supply of that good so that his operations are not affected by that critical supply. Replacement parts are a typical example of this category of supply goods.

Regarding the Eclipse 500 VLJ it is easy to conclude that, towards its customers, it falls into the category of the strategic products, due especially to its high cost and value towards the customer. Therefore close relationships between the aircraft manufacturer and its clients should be sought and both co-investment and co-development alternatives should be explored. In the case of the airliner manufacturers, such as Airbus or Boeing, it is widely known that they involve their customers early in the development process in order for the final product to serve the customers’ needs to the greatest extent possible.

Now the relationships between buyers and suppliers will be addressed. One way to classify a relationship is based on both the buyer and the seller’s motivation to relate. A graph showing a plane where relationships can be positioned according to this classification is shown in Dwyer & Tanner (2006).

Seller’s motivation to relate

High

Seller-maintained relation Joint relationship maintenance Buyer’s market

Buyer’s motivation Low High to relate

Buyer-maintained relation Discrete exchange (spot contracts) Seller’s market

Figure 2.2 - Plane used to classify relationships regarding the motivation of the seller and the buyer. (Dwyer & Tanner, 2006)

The diagram is self explanatory in what regards the effects of low or high interest of each party on the type of relationship that is established. Regarding Eclipse Aviation and its customers, in what

10 concerns the sales of aircraft all the relationships should be in the “Joint relationship” area of the graph. This kind of relationships with a high motivation both from the seller and the buyer’s side are also often called strategic partnerships. This corresponds to the strategic products defined before, where the seller has a very high interest in the sale due to its high value and the buyer has a very high interest in the relationship with the supplier in order to ensure that any problems with that product will be solved promptly; inoperability or failures in strategic products often carry very high losses to the company who owns them. One example of such a case is the hypothetical situation where both engines (strategic products) of an Eclipse 500 would fail in flight causing a crash. The company operating the jet would face large economical losses (even disregarding the value of human lives) and therefore Eclipse Aviation itself would face losses due to reduced confidence in their product. Pratt & Whitney, the supplier of such engines, is also very interested in a close relationship with Eclipse Aviation due to the high level of capital involved in the sales and in the possible negative consequences of a failure as described above. It is in this kind of situations that strategic partnerships occur.

Strategic partnerships represent the most important category of relationships for the study conducted in this work. These relationships are the ones that involve the highest possible commitment and will to relate both from the buyer and the supplier. Consequently they are the ones where early supplier involvement is most likely to take place as an attempt to bring benefits to both companies through a joint effort.

2.2 RADICAL AND INCREMENTAL INNOVATION

The background required for the analysis that will be made in this work has been laid down in the previous section. The present section will explore several views of innovation, giving a special focus to the concept of radical innovation, throughout the various definitions given in the literature.

In one of the classics of management papers from the twentieth century, Porter (1985b) states that a company will only survive and thrive in a competitive environment through achieving and sustaining a competitive advantage. This author also states that this goal can only be achieved by using one of the following three generic strategies: cost leadership, price differentiation or focus.

A cost leadership strategy means that the company has cut to the greatest possible extent its expenses in developing and producing a certain product, achieving in this area a better performance than any of its competitors, and thus is able to offer it in the market for a better price.

On the other hand, a differentiation strategy is pursued when the company has been able to produce a product that is far better than its competitors’ in a certain area that is valuable to the customer, and thus is allowed by its customers to charge a premium price.

11 Finally the focus strategy, also known as market segmentation strategy, is applied when the company directs its product to a very specific market niche and aims to achieve a marketing mix that best serves those customers.

A common factor in all three strategies is that the company must be innovative in order to be unique in at least some aspects to be able to pursue one of these strategies and achieve a sustainable competitive advantage. Recent studies done by three large consultancy companies reflect that innovation is still in the high priorities of corporate leaders around the world, and also that they agree that innovation is a key growth driver (Scanlon & Jana, 2007).

2.2.1 Innovation Classification in the Literature

Innovation is a term that in itself contains the notion that something new and unique must be achieved. Despite being a familiar term it is very difficult to provide a precise definition for it. In a study of the process of innovation Pavitt (2003) defines a general pattern about innovation. It is stated that innovation processes involve exploration and exploitation of opportunities for a new product, service or process and that it is inherently uncertain. Furthermore this process must be based either on a technological advance, a change in the demand or a combination of the two, and certainly involve learning through both trial-and-error and theory.

However it is fairly straightforward to conclude that there must be several different types of innovation. A situation where a company optimises a certain aspect of its production line to achieve a small cost reduction in one of its products is dramatically different from one where a completely new product is created with the intent of creating a new market. The issue of classifying innovation is a very broad one, and several systems have been developed by different authors; three of them are briefly stated below.

Abernathy & Clark (1985) consider that innovation can be classified based on its transilience: its capacity to influence the firms existing resources, skills and knowledge. On one end of the scale there is conservative innovation, that enhances the applicability of the firm’s existing skills, and on the other side there is radical innovation, that imposes requirements that are poorly or not at all satisfied by the firm’s current resources skills and knowledge.

Henderson & Clark (1990) classify innovation by measuring two dimensions: the degree of change in the linkages between core concepts and components and the reinforcement or overturning of the core concepts themselves. They conclude that there are four types of innovation: incremental, modular, architectural and radical innovation. These four types of innovation have been graphically arranged in a table to which the one shown in Figure 2.3 is similar in every aspect.

12 Core Concepts

Reinforced Overturned

Unchanged Incremental Innovation Modular Innovation Components

Changed Architectural Innovation Radical Innovation Linkages between Linkages ConceptsCore and

Figure 2.3 – The map of Henderson & Clark (1990) to classify innovation.

McDermott & O’Connor (2002) define discontinuous innovation as the one that creates a new line of business both for the firm and the marketplace and cite Green, Gavin & Aiman-Smith (1995) as having developed a reliable and valid measure of radical innovation based on technological uncertainty, technical inexperience, business inexperience and technological cost.

Many more definitions and classification systems exist and can be found in the literature, but for the purpose of this work a dichotomous characterisation of innovation with incremental innovation in one end of the scale and radical innovation in the opposite end is appropriate. This system is considered to be adequate since the purpose of this work is not to develop an innovation classification framework but to focus on radical innovations, while giving some considerations about the opposite end of the scale: incremental innovations. It is rather interesting to see that at least one source (Kleinschmidt & Cooper, 1991) defends that while radically new and purely incremental products perform well, the ones that are in between those extremes perform rather worse. This view is to some extent similar to the recently disputed statement of Porter (1985a) that only firms that follow pure strategies perform well, and that they should avoid the danger of being “stuck in the middle” between two strategies.

The author is nonetheless aware that the dichotomous system may prove not to be successful in gathering insight in all cases of innovation. This is the case of architectural innovation, where a small change in technology can have a dramatic effect in the performance of a product. A bi-dimensional classification system would be more adequate in this case (Henderson & Clark, 1990).

As a matter of fact other authors have, despite being aware of its limitations, chosen a dichotomous system for the same reasons as the ones stated here; one of such examples is the work of X. M. Song & Montoya-Weiss (1998) where differences in the relevance development activities are studied

13 for both “really new” and incremental products. Furthermore it is interesting to see that even in the classification system developed by Henderson & Clark (1990) shown in Figure 2.3, Radical Innovation and Incremental Innovation stand at the two opposite ends.

2.2.2 Descriptions of Radical and Incremental Innovation

Radical innovation is defined in several references that deal with that concept. Even though every definition is worded differently they all share the same core idea. In the system stated above developed by Green et al. (1995) radical innovation corresponds to a high degree of technological uncertainty, technical inexperience, business inexperience and technological cost.

In an analysis of disruptive technologies, that are closely related to radical innovation, Bower & Christensen (1995) describe the technological changes that damage established companies. These present a different package of performance attributes than the established ones and contain technological attributes with a rate of improvement such that, despite initially serving only a small market, enable the technologies to later invade the mainstream markets. Because they usually perform poorly at one or two aspects valued by current customers these disruptive technologies are usually only valuable for new markets and new applications. These disruptive technologies are often introduced into the market via a radical innovation.

In the above cited study about the differences in critical development activities for incremental and radical innovation, X. M. Song & Montoya-Weiss (1998) tackle the risk characteristic of radical innovation. They state that considerable risk is involved because in these cases not only product requirements are unarticulated but also they require targeting emerging markets, or ones with latent consumer demand. In this article, radically new products, the ones that require radical innovation and are there designated as “really new products”, are defined as showing three characteristics. Firstly they rely on technology that has not been previously used in the industry; secondly they produce an impact or cause significant changes in that industry; finally such a product is the first of its kind, or is completely new to the market.

In a study about the human side of radical innovation O’Connor & McDermott (2004) state that radical innovations stand out by the promise of reward they offer, with a broad scope and a high strategic relevance to the company, and also by the risk and uncertainty of the potential outcome. These authors cite Garcia & Calantone (2002) with the view that radical innovation is linked to high risk and uncertainty projects with a potential to greatly influence the market and bring profits to the innovating company. Building on this definition, O’Connor & McDermott (2004) operationalise this concept as classifying as radical innovations the products that either bring an unprecedented performance or an improvement of over 5 times the existing products, or that achieve a reduction in costs superior to 30%.

14 Leifer, Salomo & Gemunden (2007) define radical innovations (that they apply as a synonym of breakthrough innovations) as the ones that have the power to transform relationships between customers and suppliers, restructure marketplaces and even displace current products or create new product categories. Also according to these authors, radical innovations are closely related to dramatic market changes and to products that either serve a latent market segment or an existing segment with an unprecedented performance.

Another definition of radical innovation present in literature is that given by Song & Benedetto (2008). The authors define this concept as fundamental changes in new products that represent revolutionary changes in product or process technology (M. Song & Benedetto, 2008, p. 2). These authors also found in literature that other authors (e.g. Rice, Liefer & O’Connor (2002)) define radical innovation as a major departure from the current degree of knowledge in terms of performance, technology or cost- savings. Consequently this kind of innovations is bound to require and involve higher amounts of knowledge as well as higher risks and uncertainties that non-radical innovations.

In the dichotomous scale of innovation that will be used in this work it was said before that the opposite of radical innovation, sitting on the other end of the scale, is incremental innovation. This innovation type has the opposite characteristics of the radical innovation processes described above.

Incremental innovation then comprises moderate efforts that aim at achieving minor to moderate improvements in a product’s technology, performance or costs, and that is consequently connected with low risk and low uncertainty. The level of learning in this kind of innovations is bound to be much lower than in the case of radical innovation. According to the above stated system used by Green et al. (1995) to classify radical innovations, an incremental innovation should sport low levels of technological uncertainty, technical inexperience, business inexperience and technological cost. The definition given by Henderson & Clark (1990) is consistent with the outcome of this system, stating that incremental innovation involves improvement in individual components, refining or extending an existing design, while keeping the underlying core concepts and their linkages constant.

Despite naming it conservative innovation, Abernathy & Clark (1985) also give a definition in their work for what is referred to here as incremental innovation. The concept is similar since conservative innovation also occupies for these authors the end of the scale opposite to radical innovation. They characterise this kind of innovation as increasing the value or applicability of the firm’s competence. Furthermore it may have effects on competition, such as raising barriers to entry in a certain market, reducing the threat of possible substitutes and making competitors seem less attractive to customers. X. M. Song & Montoya-Weiss (1998) see incremental innovations as adaptations, enhancements or refinements either of existing products, or of the production and delivery systems.

More definitions of incremental innovation as the opposite of radical innovation may easily be obtained by stating the logical negation of the definitions given above for radical innovation, and so they will not be shown here.

15 Now that both radical and incremental innovation processes have been addressed, with more focus on radical innovation because of its greater importance for this work, the dichotomous scale used here to classify innovation may be laid out in a scheme, with both ends clearly put in evidence. This synthesises the discussion done here and is presented in Figure 2.4:

Figure 2.4 - A dichotomous scale used to classify innovation throughout this work.

2.2.3 Radically and Incrementally Innovative Product Development and Corporate Strategy

The very large differences shown in Figure 2.4 between the radical and incremental innovation hint that the development processes sh ould also be structurally different. A very interesting view of this area is given through an empirical study that was conducted on roughly 300 product introductions, approximately split in half between really new and incremental new products (X. M. Song & Montoya - Weiss, 1998) . Based on previous research conducted by these authors, new product development may split into six sets of general activities that are explained below:

i. Strategic planning , where the requirements of resources for the project are assessed and integrated, as well as the market opportunities and strategic directives;

ii. Idea dev elopment and screening , where potential solutions are generated and evaluated for the strategic opportunities at stake;

iii. Business and market opportunity analysis , where the above developed ideas are finely tuned to fit as well as possible into the consumer s’ needs and wishes;

iv. Technical development , that involves the design, testing and production of the new product;

v. Product testing , where the product is tested both at the assembly and component level;

vi. Product commercialisation , that involves the management of the new product launch.

Using a mathematical model and a statistic fit to empirical data from the large number of new product introductions in study, these authors (X. M. Song & Montoya-Weiss, 1998) were able to build a table with the rankings of the development activities shown before in terms of the relevance to the product success. This table is reproduced in Table 2.1, where the plus, minus or “ns” signs after each activity determine whether this activity had a positive (+) or negative (-) effect on the performance level, or if it was not significant (ns).

Table 2.1 – Relative rankings of development activities in terms of relevance to product success (X. M. Song & Montoya-Weiss, 1998)

Rank Really New Incremental

1 Product commercialisation (+) Business and market opportunity analysis (+)

2 Strategic planning (+) Product commercialisation (+)

3 Technical development (+) Technical development (+)

4 Idea development and screening (ns) Idea development and screening (ns)

5 Product testing (ns) Product testing (ns)

6 Business and market opportunity analysis (-) Strategic Planning (-)

From a strategic point of view, the two different types of innovation shown in Figure 2.4 play different roles inside a firm. From the discussion done above, it is expected that radical innovation should be important for the long-term success of a firm, while incremental innovation should tend to be more important for the short term maintenance of competitiveness and short term success.

In fact, views found in the literature by Leifer et al. (2007) state that while incremental innovation is important for short-term related issues, only radical innovation projects, which have the possibility of providing the engine for long-time growth, are able to sustain success in the long run. Furthermore, quoting from the above stated paper that studies the process of innovation, Each wave of radically new technologies has been associated with the growth of the firms that have mastered the new technologies (Pavitt, 2003, p. 35). Using harder forms of data, it has been measured by Martin (1995) that despite only representing 10% of product introductions radical innovations account for 24% of the profits from these introductions.

X. M. Song & Montoya-Weiss (1998) relate radical and incremental innovations to the growth strategies of the firm, and are in tune with the other authors cited here about this issue. On the one

17 hand growth strategies that target existing markets are implemented via incremental innovation based on the existing products. On the other hand the ones that target new markets are operationalised through radical innovation that creates “really new” products. This agrees with Leifer et al. (2007) as existing markets are closely related to the short-term strategies of companies, while new or emerging markets are connected to the long term survival and success.

Due to the fact that radical innovations bring benefits mostly in the long run and are punctuated by high risk and uncertainty, when compared to the short term benefits coupled with low risk and uncertainty of incremental innovations, they tend to be overlooked by the management of some established companies. These companies are likely to ignore disruptive technologies as a consequence of staying too close to their customers, allied with the fact that the disruptive technologies have little or no present value to these customers (Bower & Christensen, 1995). Ignoring disruptive technologies leads to missed chances for radical innovation that may use these technologies, and that could result in a product that would be far more attractive to the customers than the present one. This sole fact can be the source of significant losses for a company if a certain competitor is successful in the development of a radical innovation project with one of such disruptive technologies. Examples of companies losing market leadership from situations of quasi-monopolies are given by Bower & Christensen (1995) for the hard disk industry.

The mix of low short term incentives for radical innovation together with high risk and uncertainty poses another obstacle to radical innovation in firms. The problem arises from the fact that it is not uncommon for radical innovations to take a very long (up to ten years or more) development time and require millions of dollars in investment. This long period allows for the members of the team to leave it and for new ones to take their place, and even for senior managers to be replaced during the project, leaving space for new policies and management paradigms that may cause numerous stops and starts of the innovation process (McDermott & O'Connor, 2002). Top-level management, that is bound to be concerned about strategic issues that will determine the long term success of companies, should then take responsibilities in protecting radical innovation projects from these negative exogenous influences.

A simpler structure of a firm, more flexible and using less people should then be less vulnerable to these kinds of problems due to namely the top-level managers and strategists being closer to all the sectors of the firm. The next section will focus on the relationship between radical innovations and a type of companies that show these apparently favourable characteristics: new ventures.

2.3 NEW VENTURES AND RADICAL INNOVATION

The last part of the previous section provided some hints on issues that may detract established companies to embark in radical innovation projects. In this section the relationships between new ventures and the occurrence of radical innovation initiatives are to be studied.

18 Historically radical innovation has been much more connected to start-up companies, or new ventures, than to established companies. As an example, in the above cited example of the appearance of disruptive technologies in the hard disk industry studied by Bower & Christensen (1995) the established companies always lost the battle to new ventures that mastered the new technologies, and used them to produce new products that may be classified as radical innovations on the scale of Figure 2.4. Furthermore, the new ventures that on a certain wave of technology rose to dominate the market (and thus became established companies) lost in competition to then new ventures that would in the future become the new established companies.

New ventures are generally entrepreneurial efforts that are initiated with the intent of bringing into the market an innovative new product (Lodish, Morgan, & Kallianpur, 2001). It is not rare that an employee from an established company, after some years of work experience, to encounter a business opportunity and start his own company to fill this need, via an innovative product. Frequently due to the limited financial resources initially available to new ventures they are extremely dependent on the success of the new venture for the survival of the company (M. Song & Benedetto, 2008). This ensures that they do not commit one of the most common mistakes of established organisations towards radical innovation: managing it as if it was incremental innovation (McDermott & O'Connor, 2002).

The small initial size of the new ventures accounts for a large degree of the flexibility of these companies with low associated costs. These are the main advantages of a new venture compared to a large established company in the field of radical innovation. Due to the high uncertainty present in radical innovation projects it is common for the development to have several twists and turns that correspond to a learning process by trial and error which would bring heavy costs in a large established company, due to its large corporate inertia. In a study of the process of innovation, Pavitt (2003) conducted interviews to people connected to innovation in established companies; one of such interviewees is quoted saying that the difficult task is to combine the radically new competences with the existing ones, which have to be changed in order to exploit the new opportunities opened by the possible radical innovation. Furthermore, people specialised in areas that the radical innovation does not favour may show resistance as they feel that their role in the company is endangered, while managers are particularly resistant to change after successful endeavours (Pavitt, 2003). As new ventures are starting their business from scratch these negative factors, which result mainly from past experiences, are generally not present.

There are other areas that are not so apparent where new ventures are advantageous in relation to established companies when it comes to radical innovation. One interesting discovery regarding radical innovations is that they thrive on informal networks (O'Connor & McDermott, 2004, p. 23). Radical innovations frequently need to draw knowledge from very different fields. This is evident on the definition of radical innovation that emerges from the system of Figure 2.3: a radical innovation changes not only the core concepts themselves but the linkages between the core concepts. The need for knowledge from very different fields comes from this requirement of changing the core concepts and the linkages between them. Thus radical innovation stretches the organisation beyond

19 its current domains; (…) there is a constant need to draw on every aspect of the organisation’s knowledge and skill base as needed (O'Connor & McDermott, 2004, p. 23). The informal networks are the means by which individuals rapidly grasp information from a variety of fields, increasing the performance of the radical innovation process. A piece of information that may be essential to assess the feasibility of a certain idea that could take hours to find in literature may be found through an informal network (e.g. a phone call to a specialist in the area) in a much more efficient way.

Established firms, having understood the role of informal networks, make efforts to catalyse their formation and ensure their maintenance. This is done by diverse ways, namely carefully crafting the management boards and boards of advisors for the innovation projects in such a way that the members’ skills complement each other’s.

However, in new ventures the occurrence of informal networks is very likely to take place, without any need for an explicit mechanism to create them. New ventures tend to start small, and due to the above cited pressure to be successful in the new innovation, the entrepreneur (or entrepreneurs) tends to very careful when choosing the people to be integrated in the company in order to encompass a large range of important knowledge areas. Since the company is still small it is much more likely that the informal relationship between employees in different functions is more developed than in the case of a large departmentally structured established company. The fact that the existence of efficient informal networks is essential to the performance of radical innovations is then one factor in which the new ventures have an advantage over the established companies.

This section about the advantages of new ventures, compared to established companies, in the field of radical innovations, should not finish without stating that the established companies have already been aware of these advantages for a long time. This is why some senior managers go to the extent of creating and protecting separate business units, and even separate companies (Pavitt, 2003), focused solely on radical innovation. Its members are carefully chosen to encourage the units to work as incubators of radical innovations in an attempt to secure a successful long term future for the group.

2.4 AN EXAMPLE OF RADICAL INNOVATION IN A NEW VENTURE: THE DEVELOPMENT OF THE ECLIPSE 500

In the previous sections a detailed discussion has been presented focusing on innovation, on radical innovation and on the characteristics of companies that may foster these projects. Since the aim of this thesis is to use the Eclipse 500 development as a case study of supplier involvement in a radical innovation by a new venture, it urges to carefully introduce the Eclipse 500 VLJ and see if it matches with the above stated concepts of radical innovation and if its developer may be considered a new venture.

20 2.4.1 Eclipse Aviation and the Eclipse 500 Very Light Jet

Eclipse Aviation was founded in 1998 by a former executive of Microsoft and pilot, Mr. Vern Raburn, who felt the need for a lighter jet than any of the ones then available in the market. The company is headquartered in Albuquerque, New Mexico, United States.

The aircraft development project that would lead to the Eclipse 500 started in 1999 and the first flight took place in 2002. In 2006 the Eclipse 500 VLJ was granted its FAA airworthiness certificate and the first customer delivery took place in early 2007 (Eclipse Aviation, 2007g). As said before, this aircraft that sits in standard configuration 6 persons and with a maximum range of 1300nm (assuming 4 persons on board) has a purchase price of 42% less and a total operating cost per hour 35% lower than the Cessna Mustang, an aircraft very similar to the Eclipse in terms of technical specifications (Eclipse Aviation, 2006a, 2007b). A photograph of the Eclipse 500 and one of its glass cockpit are shown in Figure 2.5.

Figure 2.5 – The Eclipse 500 VLJ and its electronically advanced glass cockpit.

With a purchase price of less than 1,200,000€ (as of July 2007), annual fixed costs amounting to roughly 22,200€ and a variable cost (cost per hour flown) of about 147€ including all maintenance expenses and pilot training (Eclipse Aviation, 2007a) the alternative of the Eclipse 500 can be made much less expensive to fly (assuming a certain minimum of flight hours per year) than the current offer from NetJets that uses the Cessna Citation Bravo. Several companies have already realised the true potential of operating the Eclipse 500, and three of them have worked with Eclipse Aviation as key customers during the development phase of the project (Eclipse Aviation, 2007c).

One of such companies is DayJet, that has already placed firm orders for 239 Eclipse 500 Jets (Eclipse Aviation, 2007d). This company has a business model in which it uses the Eclipse 500 and sells individual seats to passengers in order to obtain the lowest possible ticket price for each flight, and numerically optimises its schedules according to the passengers’ demand.

One of the major conceptual differences between the Eclipse 500 VLJ and its competitors in the market is that, despite being a valuable tool for jet operators, the Eclipse 500 was the first ever

21 production jet that was designed with owner-pilots in mind. By this it is meant that instead of hiring a flight crew and being charged with all the expenses that includes the customer is encouraged to fly the airplane himself, much like people do with their own cars, thus reducing the costs of flying to an even greater extent.

However the Eclipse 500, being a twin engine pressurised jet capable of high altitudes and transonic speeds, is bound to be a complex machine. This kind of aircraft is usually only certified for operation by a flight crew of two pilots who must hold multi crew licenses 1 and have a large amount of experience. To counter some of these obstacles Eclipse Aviation has used state of the art electronics so that the workload placed on the pilot is greatly reduced and has consequently attained a certification for single pilot operation (Eclipse Aviation, 2006d). Furthermore, this manufacturer provides a complete package that besides maintenance and flight publications includes recurrent training for the owners in its yearly cost.

Furthermore it should be pointed out that the Eclipse 500 has radically broken from certain aspects of the conventional business jet concept. The first issue is the above mentioned fact that it was designed with owner-pilots in mind, when all the jets that came before it were designed for the owners to be passengers only. Furthermore, Eclipse Aviation has made several design and concept compromises that are totally new. The fact that the aircraft toilet is in itself an optional feature to reduce costs is totally new in the industry and showcases the philosophy of Eclipse’s approach, and the same applies for the ease in which a possible customer may browse through the website, configure his own jet and get a customised price quote immediately. In the competitors’ websites, for instance Cessna or Embraer, it is impossible to promptly obtain a price quote for a product as one is directed to a corporate sales representative. This aspect of the product, in which it defines a new set of performance attributes (Bower & Christensen, 1995), is one of the signs of a disruptive technology.

This impressive set of facts and figures makes the Eclipse 500 VLJ a fundamental mark not only in the world of business aviation in particular and air transport in general but also in new product development projects. The Eclipse 500 VLJ was developed in a very low time-to-market (when compared to the standard for jet aircraft) and with a much lower cost base than any present competitor. Furthermore, it has gathered a very large amount of advance orders. According to the corporate website the number of orders amounted to more than 2000 in the year of 2004.

This work will not delve into the effects of this product for air carriers not for the air travel market; instead it will look into selected supplier-related aspects of the development project to investigate whether there are lessons than can be learnt from this particular development project in the area of the management of new product development, both for future projects at Eclipse itself and for other products in different industries.

1 A multi crew license is a qualification that may be acquired after a flight crew license, consisting of theoretical courses plus simulator or flight time, with a focus on the operation of complex aircraft by a team of pilots with complementary roles in the flight deck.

22 2.4.2 Classifying the Eclipse 500 VLJ as a radical innovation conducted by a new venture

It is also important to classify Eclipse Aviation as a new venture; this is a very straightforward task. Some sources describe new ventures as companies that have been created no longer than a certain number of years ago, ranging from eight to ten (Li, 2001; Tsai & Li, 2007). Since it was created in 1998, Eclipse Aviation may no longer be a new venture through this definition. However the aircraft industry is characterised by longer development times than many industries, namely due to the required concerns about safety. The considered time periods should be considerably longer for this industry, and consequently this definition may not appropriate for Eclipse Aviation.

M. Song & Benedetto (2008) cite literature where it is said that most new ventures are launched with the purpose of exploiting an opportunity or commercialising a specific product; this agrees with the above stated definition of Lodish et al. (2001). Eclipse Aviation was created in 1998 with the purpose of focusing in the design, production and commercialisation of the Eclipse 500 VLJ (Eclipse Aviation, 2007g); under this statement it is a new venture.

It is then possible to state that Eclipse Aviation may be viewed as a new venture, created with the purpose of commercialising an innovation: the Eclipse 500 VLJ. In the remainder of this section it will be analysed whether this product has the characteristics that enable it to be classified as a radical innovation.

Logically the first instrument used to assess this issue is going to be the dichotomous scale built here from the contributions of the literature and shown in Figure 2.4 (page 16). The attributes shown there will be analysed sequentially for the Eclipse 500:

i. High risk is the first characteristic of radical innovation shown in the scale. The Eclipse 500 VLJ packs several attributes that are related to this characteristic. Firstly it is targeting the Very Light Jet market, that it is creating, which implies a much greater risk than if it was targeting an established market. In order to do this it uses another characteristic of radical innovation: the definition of a new set of performance attributes (Bower & Christensen, 1995). This decision also intensifies the risk of the product, because it is not known if the new set will be successful in drawing customers or if on the other hand its weaknesses towards the previous sets of performance attributes will be reasons for its failure.

ii. High uncertainty is closely connected to high risk and is mainly the cause for it. Uncertainty in the demand and in the markets is a problem due to the high investment costs of the several years spent developing the Eclipse 500. This factor magnifies the risk already present in the introduction of a new product. During the development phase, technological uncertainty was also present as it was not known ab initio if all the technological challenges presented by the Eclipse 500 could be solved in a feasible way, while keeping close to the product philosophy, namely the low costs. One of the ways that companies can use to try to reduce technological

23 uncertainty is the involvement of suppliers in the development process. This issue will be addressed in the next section. iii. High strategic relevance is also a factor in the classification of innovations as radical ones. Due to the high development costs mentioned above and the fact that Eclipse Aviation is in itself a new venture only launching the Eclipse 500 the strategic relevance of this product to Eclipse Aviation is very high. If the product sales do not meet the company’s goals its very survival is bound to be threatened. Consequently the Eclipse 500 is the major element of Eclipse Aviation’s business strategy and satisfies this requisite. iv. High level of learning is the fourth item in the scale of Figure 2.4. The technological obstacles that had to be solved during the development of the aircraft provided ample opportunities for new knowledge to be integrated into the company. However, the measure of including suppliers in the development project to reduce uncertainty can reduce the level of learning if used extensively. This is because if the company may only use the suppliers’ technical expertise to surmount the technological barriers in its development project and will not gain any knowledge on those technologies. This would bring another disadvantage: an excessively high bargaining power of the suppliers. Probably in order to counter this effect, Eclipse Aviation has developed and registered at least two proprietary technologies during the development of the Eclipse 500 (Eclipse Aviation, 2004d, 2005b), that are essential to the production of the aircraft. The fact that these technologies were fully developed in house, are completely new and have been licensed separately in order to be sold for different applications other than the production of the Eclipse 500 implies that a high level of learning was present in this development process. v. The fifth item in the scale is the creation of new product lines as opposed to the refinement or expansion of a currently existing product line for an incremental innovation. This characteristic has already been implied in previous items of this list. The fact that the company is a new venture and this aircraft its launching product already requires that a new product line is being created. Furthermore an experimental new product based on the concept of the Eclipse 500 has already been unveiled (Eclipse Aviation, 2007e, 2008b), hinting that a product line with more than one aircraft is planned for the future. vi. The final characteristic of radical innovations shown in the dichotomous scale is that they are important mainly for the long term survival of the company. It is also fairly straightforward to see that the Eclipse 500 VLJ satisfies this prerequisite. It has been said before that this aircraft may be the starting product of a new product line for Eclipse Aviation; furthermore it is venturing into a completely new market that this company intends to create. It opens possibilities for the company’s future, as spin-offs and other variations of the product to serve

24 specific market segments may be created, as incremental innovations stemming from this radical one.

The above paragraphs show that the Eclipse 500 satisfies every characteristic of the “radical innovation” in the dichotomous innovation scale shown in Figure 2.4. Arguments may be provided to justify that it also falls into this category in all the systems shown before (section 2.2.1), and that matches the descriptions of radical innovation of section 2.2.2. An extensive discussion of all those systems is not necessary, but it may be interesting to show how this product actually matches the descriptions of radical innovation given in section 2.2.2.

The first of such descriptions to be analysed is the one of X. M. Song & Montoya-Weiss (1998). As stated above the description done by these authors states that radical innovations (completely new products in their terms) have three characteristics. The first one is that the really new product relies on technology that has not been previously used in the industry; this holds true for the Eclipse 500. One example of such is the use of the integrated avionics package developed solely for the Eclipse 500 to reduce workload for the pilot and thus allow for single pilot operation (Eclipse Aviation, 2007f); further examples are the patented technologies of friction stir welding (Eclipse Aviation, 2004d) and PhostrEX fire suppression technology (Eclipse Aviation, 2005b). The second characteristic is that the innovation produces an impact or causes significant changes in the industry; the opening of new companies operating solely Eclipse 500 VLJ’s to operate in completely new business models (e.g. DayJet, 2007b) is on its own evidence of such fact. The third and final attribute is that the product is the first of its kind; taking into account the previously stated unprecedented characteristics of this aircraft (such as the low costs and design with owner-pilots in mind) it is not difficult to see that the Eclipse 500 also fulfils this requirement.

The description of O’Connor & McDermott (2004) refers that radical innovations sport a promise of reward with a high strategic relevance to the company while at the same time bear considerable risk and uncertainty concerning the outcome. These authors also mention a reduction in costs superior to 30%. As stated before, analysing figures from the Eclipse 500 and its competition (e.g. the Cessna Mustang) the reduction in purchase cost is of 42% and of 35% in terms of total operating costs (Eclipse Aviation, 2006a, 2007b) one can see that the 30% reduction in costs requirement is easily satisfied. Regarding uncertainty in outcome and strategic relevance no further explanations need to be given since these characteristics are present in the scale of Figure 2.4 and consequently discussed in the numbered items (ii) and (iii) of page 23.

In the words of Leifer, Salomo & Gemunden (2007) radical innovations transform relationships between customers and manufacturers, restructure marketplaces and create new product categories. The design with owner-pilots in mind deeply transforms the relationship between the customer and the manufacturer of business jets; furthermore this aircraft is seen as the initiator of the new market of very light jets, fulfilling as well the characteristic of displacing current products (the low cost segment of business jets is redefined by the Eclipse 500 as said before) and creating new product categories. The product also serves a latent demand, another characteristic mentioned by the authors of this

25 description; this is proved by the fact that Eclipse Aviation had received in excess of 2000 orders well before the first jet had been delivered (Eclipse Aviation, 2004b).

The final description to be analysed here is the one given by M. Song & Benedetto (2008); the authors refer fundamental changes in product or process technologies. Bearing in mind the discussion done in this section it is straightforward to conclude that the proprietary technologies patented by Eclipse Aviation represent fundamental changes in process technology; an example of fundamental changes in product technologies is the above mentioned integrated avionics package, that brings together several systems and products from different suppliers to provide an integrated interface for the pilot with the intent of simplifying his task and thus achieving approval of the aircraft for single pilot operation.

This section has shown that the development process of the Eclipse 500 VLJ may be seen as a case of radical innovation by a new venture. The Eclipse 500 was classified as a radical innovation through the scale of Figure 2.4 and was then tested against several radical innovation definitions present in the literature in order to validate the results of the dichotomous scale defined for this work.

The next section will now deal with the issue of early supplier involvement in new product development, a central theme for the research conducted in this thesis.

2.5 EARLY SUPPLIER INVOLVEMENT: A FRAMEWORK

It has been mentioned before that one of the measures that may be used to reduce uncertainty in innovation projects is the involvement of suppliers in the early stages of product development. The aim of this strategy would be to leverage the suppliers’ specific expertise in their area of business to enhance the quality of the final product.

This involvement is however a fairly complex process in which several firms attempt on the one hand to relate on the best possible terms in order to achieve a successful partnership while on the other hand each company keeps closely in mind its own interests, that may in some points collide with the partners’ ones. A good insight into these relationships may be obtained by analysing a framework that has been developed by Wynstra, Weggeman & van Weele (2003) to assess early supplier involvement in new product development. This framework does not target radical innovation projects but rather new product development in general. Supplier involvement is more important however for the radical innovation processes due to the high levels of uncertainty present in these cases as explained above.

The first building block in the framework of Wynstra et al. (2003) is the concept of key process. Key processes are attributes that can be used to classify each of the activities that will be identified in the process of product development. There are five key processes defined by these authors: prioritising, mobilising, coordinating, timing and informing. These will be more clearly defined in the following list.

26 i. Prioritising: looking from the perspective of a company that is currently developing a product (the manufacturer) there is a network of other companies that might sell products or services to that company (suppliers). Due to resource limitations the company has to decide in which way these resources will be used in the product development; this comprises selecting which suppliers to collaborate with and determining the extent of this collaboration. This process is called prioritising;

ii. Mobilising: another of the key processes described by Wynstra et al. (2003) is mobilising. This refers to stimulating the selected suppliers to get involved in the development. This can be achieved, for example, by giving the selected supplier access to some kind of company specific valuable knowledge or securing a large number of orders of the production of that supplier;

iii. Coordinating is also among the key processes described in this framework. When one speaks of supplier integration in a development process a synchronized interaction between several organisations is implied, in order for efficiency to be high. However there is no management board above all the parties that can formally coordinate this interaction, so some of the activities of the manufacturer will involve ensuring this synchronisation. This process is called coordinating;

iv. Timing: some aspects of the coordinating key process deal with time constraints; some activities cannot begin before other ones are completed and some will directly affect the development time if delayed, whether others will not if the delay is sufficiently small. The temporal coordination of the efforts of the suppliers and of the manufacturer is called timing;

v. Informing: the fifth and final key process is essential both to coordinating and timing and is called informing. It deals with the sharing of information between the different parties during the development process.

Wynstra et al. (2003) also concluded from their research that purchasing activities, and consequently the contacts with suppliers, are done at different levels in the organisation and that led to the definition of levels of responsibility concerning supplier integration in the development process:

i. Specifications responsibility deals with involvement in the design of a product; ii. Operations responsibility regards the coordination and timing of the activities; iii. Preparations responsibility concerns the beginning of the project; iv. Structure responsibility deals with the management of the network of suppliers; v. Policy responsibility concerns informing the different parties taking part in the product development.

It should be noticed that the last two levels are not project dependent but rather broader.

27 The authors then distinguish four management areas that are involved in product development: development management, supplier interface management, project management and product management. The connections between these four management areas that make supplier involvement possible are represented schematically in Figure 2.6.

Figure 2.6 – The four management areas that make supplier involvement possible.

The development management area encompasses the activities that make the existence of the other areas of product development possible. This area contains four activities described in Wynstra et al. (2003) that are shown and briefly explained in Table 2.2. Additionally the key processes that are involved in each activity are also shown in this table 2.

Activities (1.1) to (1.4) could correspond in Eclipse’s case to, for example, devising a specifications book common to all suppliers stating each one’s responsibilities and deadlines and distribute it to all the parties involved in the process, both inside and outside the manufacturer. More specifically, activity (1.1) could be for example the decision about to what extent should the fuselage be built in Eclipse’s hangars from scratch as opposed to be done from a small number of complex sub assemblies done by suppliers. Activities (1.2) and (1.3) involve deciding specifications and responsibilities for the components outsourced as well as for the ones developed in-house, and finally (1.4) to the process of distributing that information to the concerned parties.

The supplier interface management area is a central one to all the other management areas. It represents the strategic activities carried out by the manufacturer in order to effectively manage its network of suppliers. This area is not project dependent and is essential for the success of supplier integration in the projects of the manufacturer. It will be described on Table 2.3, similar in format to Table 2.2, where each activity is listed and related to the key processes involved in that particular activity.

2 The following abbreviations are used in the table, as well as in the following ones: Pri – Prioritising; Mob – Mobilising; Coo – Coordinating; Tim – Timing; Inf – Informing.

28 Table 2.2 – Activities inside the area of development management.

Key Processes Involved Code Activity Remarks Pri Mob Coo Tim Inf

Important for the benefits of Determining which technologies to cooperation not to be erased by 1.1 keep/develop in-house and which
excessive dependence on ones to outsource suppliers

Actions taken by the manufacturer Formulating guidelines for the to ensure that responsibilities are 1.2 involvement of suppliers in

objectively defined between product development collaborators

Formulating guidelines for Similar to the previous one, but purchasing related activities of 1.3 aiming to achieve clarifications

internal departments in product inside the company development

Communicating policies and Communication of the results of 1.4 procedures internally and activities 1.1-1.3 both inside and
externally outside the company

Table 2.3 – Activities inside the area of supplier interface management.

Key Processes Involved Code Activity Remarks Pri Mob Coo Tim Inf

Proactively scout the market searching Monitoring supplier markets for 2.1 for innovations in general and not for a
technical developments specific solution

Motivating suppliers for Involves the manufacturer choosing the 2.2 product development
suppliers it is interested in working with collaboration

Motivating suppliers to build For example, the manufacturer creating up/maintain specific a situation that will give advantages to 2.3

knowledge or develop certain the supplier if the final product is products successful

Involves understanding the strong Leveraging the technical points of the suppliers and moulding the 2.4

capabilities of the suppliers development process to take advantage of them

In this activity supplier evaluation Evaluate suppliers’ criteria are used to assess the network 2.5
development performance of suppliers and determine the desirability of each one

Regarding Eclipse activity (2.3) could be, for example, offering payment as shares of Eclipse Aviation; in this way if the supplier achieves a high performance that will influence the performance of the

29 Eclipse 500 the additional earnings for Eclipse Aviation will be reflected in earnings for the manufacturer. Activity (2.4) can represent, for example, working with a tyre supplier to manufacture a tyre that will meet the specifications of a ground-breaking landing gear being developed by the landing gear supplier, and not the other way around.

The third management area that the authors of this framework deal with is project management; this area is further divided into (3.1) project planning and (3.2) project execution. Project planning concerns several short time decisions before the beginning of the project, and project execution deals with the integration of activities during the development project between the different parties. The activities will be presented in Table 2.4 in a similar format to the previous areas.

Table 2.4 – Activities inside the area of project management.

Key Processes Involved Code Activity Remarks Pri Mob Coo Tim Inf

3.1 – Project Planning

Determining specific develop-or-buy 3.1.1
solutions These four activities represent Selecting suppliers for involvement in 3.1.2 a breakdown of activity (1.1)



the development process applied specifically to a project Determining the extent of supplier of product development 3.1.3

integration

Determining the moment of supplier 3.1.4

integration

3.2 – Project Execution

Integrating development activities 3.2.1


between suppliers and manufacturer The objective of these activities is to ensure unity of Integrating development activities 3.2.2 the final product and


between first tier suppliers compatibility from the Integrating development activities components that come from different sources 3.2.3 between first tier and second tier


suppliers

The activities of (3.1) correspond to the practical definitions of the decisions done in (1.1) for this particular project. Activities of (3.2) can correspond, for example, to promoting contacts between suppliers themselves and between suppliers and the manufacturer in an organised fashion in order to ensure efficiency. One example is the organisation of regular meetings with elements of all the important companies.

30 The fourth and final management area described by Wynstra et al. (2003) is product management and deals with the specifications level of responsibility defined before. The development of a new product is an open ended process in the sense that the range of results it can have is evidently broad. In the beginning of the process the range of solutions should be kept broad in order to identify candidates for good solutions, but towards the end bad candidates should be eliminated so that the resources of the company are concentrated in a small number of good alternatives. Product management concerns this narrowing and broadening of the range of solutions; its activities can be classified in extending activities and restrictive activities (Wynstra et al., 2003). Similarly to the first three areas the activities of product management will be laid down in Table 2.5.

Table 2.5 – Activities inside the area of product management.

Key Processes Involved Code Activity Remarks Pri Mob Coo Tim Inf

4.1 – Extending Activities

Providing information on new 4.1.1 products or technologies being These activities tend to

developed or already available broaden the range of solutions available for the final product Suggesting alternative suppliers, 4.1.2 products or techniques to achieve


higher quality in the final product

4.2 – Restrictive Activities

These activities aim at Evaluating designed parts in terms of narrowing the range of
4.2.1 possible solutions for the final availability, makeability, cost, etc. product. These could be carried out by each supplier but they lack the global vision of the project that only the Promoting standardisation and 4.2.2 manufacturer has, so


simplification of designs and parts elements of the manufacturer should be involved

Regarding the Eclipse 500 VLJ, it is easy to give examples of possible practical activities in this area. By carrying out activity (2.1) new solutions from the market are discovered and new suppliers found. This corresponds to the extending activities; these could have been found in the beginning of the design process of the Eclipse 500 VLJ. Then restrictive activities need to be carried out, in order to determine the most desirable supplier for each component or assembly. The restrictive activities will lead to the celebration of an agreement with a certain supplier and in the end to the exact specification of the involvement process of that supplier. Additionally it is also important for Eclipse Aviation to stop suppliers wasting their resources in solutions that one knows from the beginning will never be desirable for the Eclipse 500 VLJ. This could happen if a certain manufacturer was going to

31 investigate designs of its part in an extremely expensive material and Eclipse told him not to invest his time in that particular design because the cost would be too high; the supplier’s time could then be used to investigate other designs that are more desirable for Eclipse Aviation.

Through the analysis of this framework insight has been gathered into a large number of aspects regarding early supplier involvement in new product development. The next section of this chapter is devoted to the specific case of supplier involvement in new product development processes involving radical innovation by new venture companies.

2.6 SUPPLIER INVOLVEMENT IN A RADICAL INNOVATION BY A NEW VENTURE

Literature about the specific issue of supplier involvement in cases of radical innovation by new ventures is scarce. There is a large body of research conducted about radical innovation in new ventures versus established companies (e.g. Rice et al. (2002)) and about supplier involvement in innovation processes (e.g. Wynstra et al. (2003)), but only one recent source dealing specifically with the issue of supplier involvement in radical innovation by new ventures was found in our review of the literature (M. Song & Benedetto, 2008). The present section consists of an overview of the research and the conclusions obtained by these authors. The thorough analysis of this work is justified since a part of the research design of the present thesis is to test selected hypotheses from this reference in the particular case of radical innovation by a new venture: the Eclipse 500 VLJ.

In the referred article the authors proposed to study the problem of supplier involvement in radical new product development by new ventures by first developing a conceptual model and afterwards testing it on a large base of empirical data. As argued before, the authors state that more and more small firms are leveraging their suppliers’ abilities to increase their chances of survival and success. These authors chose the theory of transaction cost analysis (Williamson, 1975) to inspire the building of their conceptual model, that is based on the definition of seven research hypotheses. The testing of these hypotheses was done with 982 new ventures and their suppliers through the use of interviews and questionnaires.

The first hypothesis defined by these authors proposes a positive relationship between the level of supplier involvement with the new venture and the performance of the radically innovative product. The empirical data gathered by these authors was found to support this hypothesis. The generally known relationship between supplier involvement and new product development performance (that is supported by a large body of literature such as Petersen, Handfield & Ragatz (2005)) was then found to hold true for the case of radical innovation by new ventures in the analysis of M. Song & Benedetto (2008).

The second hypothesis proposes a positive relationship between the supplier’s specific investments and the levels of supplier involvement in radical innovation by new ventures. Specific investments are

32 the investments done by the suppliers which are clearly less valuable outside the relationship with that new venture. The empirical data was also found to support this hypothesis; a possible explanation for this is the increase in downside risk towards the supplier that comes along with specific investments, further motivating the supplier to be involved with the new venture.

Supplier qualification and assessment is also an important activity in supplier involvement in new product development (e.g. Wynstra et al. (2003)). The third hypothesis posed by M. Song & Benedetto (2008) proposes a positive relationship between effort in qualifying suppliers’ abilities (done by the new venture) and the levels of supplier involvement in the radical innovation project. Similarly to the first two hypotheses the empirical data analysed in this article supports this hypothesis. As said before, new ventures are frequently much more motivated than established companies to succeed in their new product development projects because their very survival may depend on this (Pavitt, 2003). This may further motivate them to make efforts in assessing and qualifying the suppliers before engaging in serious involvement relationships.

In relationships between companies, such as a supplier that sells goods to a manufacturer, the power balance between the players is always a delicate issue. M. Song & Benedetto (2008) hypothesise that an increase in new venture power will further increase the previously confirmed positive relationship between the supplier’s specific investment and the level of supplier involvement in the radical innovation project. Similarly to the first three hypotheses the empirical findings of the authors support this fourth statement. This could be explained by the usual difference in size and power between a small and new company and an established supplier; a path towards a more equal power distribution (represented by an increase in the new venture power) may lead to higher levels of involvement and further commitment from the supplier.

The fifth hypothesis proposed by these authors proposes a positive effect of the new venture’s relative power in the previously confirmed relationship between effort from the new venture to qualify suppliers and levels of supplier involvement in the radical innovation project. Unlike the previous hypothesis this one was not supported by the empirical data; the authors state that this constituted at first a surprise. Although no clear explanation is available for this conclusion, a fear of opportunistic behaviour by a highly qualified supplier may cause this effect in a project that as explained before is already punctuated by a large degree of risk and uncertainty especially on the side of the new venture.

The sixth hypothesis studied in the article of M. Song & Benedetto (2008) is somewhat the opposite of the fourth one. This hypothesis states that an increase in the new venture’s commitment to the supplier will enhance the previously mentioned positive relationship between the specific investment done by the supplier and the level of involvement in the radical innovation process. This hypothesis was not supported by the empirical data gathered. This result is not surprising after the confirmation of the fourth hypothesis by the same data. An increase in the new venture’s commitment to the supplier is similar to an increase in the relative power of the supplier over the new venture, thus making the supplier less eager to relate with the new venture.

33 The seventh and final hypothesis posed by M. Song & Benedetto (2008) is the converse of the fifth one, proposing a positive relationship between the new venture’s commitment to the supplier and the positive relationship between the qualification of the supplier’s abilities and the level of involvement. This hypothesis was not supported by the empirical data; a negative relationship was found here instead. The authors of the study propose an explanation for this result with a basis on attribution theory. According to this doctrine a highly qualified supplier would be more likely to seek attribution to external sources of any difficulties or frustrations that appear during the relationship. The prime external source for attribution in this relationship is the new venture, thus possibly explaining the negative effect on the level of involvement of the combination of increased commitment with qualification of suppliers’ abilities.

The main conclusions of the testing of hypotheses present at the study of M. Song & Benedetto (2008) are organised below in Table 2.6.

Table 2.6 – Results of hypothesis testing of M. Song & Benedetto (2008) about suppliers’ involvement in radical innovation by new ventures.

Nr. Hypotheses Status

Positive relationship between supplier involvement and success of the radical 1 Supported innovation of the new venture;

Positive relationship between suppliers’ specific investments and the level of 2 Supported involvement in the radical innovation project of the new venture;

Positive relationship between the qualification of suppliers’ abilities and the 3 Supported level of involvement in the radical innovation project of the new venture;

Positive influence of the new venture’s relative power in the positive 4 Supported relationship of (2);

Positive influence of the new venture’s relative power in the positive 5 Not Supported relationship of (3);

Positive influence of the new venture’s commitment in the positive relationship 6 Not Supported of (2);

Positive influence of the new venture’s commitment in the positive relationship 7 Not Supported of (3).

Now that the most important contribution so far to the analysis of supplier involvement in radical innovations by new ventures has been clearly explained the theoretical background and literature review needed for the research to be done in this thesis is finished. The next section will deal with the way the research problem presented in the introduction is structured into research questions and hypotheses to be addressed in the study.

34 2.7 RESEARCH PROBLEM, QUESTIONS AND HYPOTHESES

So far this chapter has provided insight into theoretical aspects of the area that is going to be studied; this section aims at defining the research problem and formalising it into research questions and hypotheses.

It has already been stated in the introduction to this work that the main motivation to study this company was the aim to gain insight into the practices involved in nurturing a very successful radical innovation project conducted by a new venture. This constitutes the research problem of this thesis. The goal of the present work may be phrased as:

To study the supplier involvement in the development process of the Eclipse 500 Very Light Jet, by Eclipse Aviation, as a case study of supplier involvement in a radical innovation carried out by a new venture, and attempt to validate hypotheses as well as extract lessons from that project that may be useful for future research and managerial practices.

The research problem is written out in the paragraph above, but to allow it to be studied it has to be divided into more specific questions and hypotheses that are to be addressed individually. The hypotheses will be explained first and the questions left out for later in this section.

2.7.1 Research Hypotheses

According to literature on research methods (Trochim, 2005) a research hypothesis is a statement that makes a specific prediction about a certain event. It may predict the absence or presence of relationships between variables, the occurrence of a certain outcome and a multitude of other events. There are consequently several types of hypotheses that can be made. The ones to be used in this study are all of the type that describes a relationship between two variables.

Hypotheses dealing with the relationship between two variables may be further divided into two types: one-tailed and two-tailed hypotheses. One-tailed hypotheses predict a direction in the relationship between the two variables while two-tailed hypotheses do not specify such a direction. As an example, a hypothesis predicting the existence of a relationship between two variables is two-tailed, while one predicting specifically a positive relationship between them is deemed to be one-tailed. The hypotheses that will be used in this work are of the one-tailed type as will be seen below.

Furthermore, if one hypothesis is laid out then two hypotheses are actually being stated; the second one is the logical negation of the first, predicting all the other possible outcomes of the predicted situation (Trochim, 2005). In order to distinguish between them they are respectively called the alternative and the null hypothesis. The alternative hypothesis describes the outcome that the researcher expects to happen; the null hypothesis encompasses all the other possible outcomes, the

35 ones that the researcher does not expect. The aim of the researcher is then to validate either the alternative or the null hypothesis regarding each prediction.

Now that it has been clearly understood what a hypothesis is as well as how it is used the four pairs of hypotheses made for this thesis are going to be presented. In order to be coherent with the above mentioned definitions of alternative and null hypotheses each prediction will be formulated as a pair of an alternative and a null hypothesis. The first two pairs of hypotheses regard assessing whether early supplier involvement has contributed to two aspects of the very good performance achieved so far by Eclipse Aviation in the development of the Eclipse 500 VLJ. The last two pairs regard testing whether or not two of the hypotheses validated by M. Song & Benedetto (2008) in their general study of supplier involvement in radical innovation done by new ventures are also valid in the specific case of supplier involvement in a radical innovation done by a new venture that this work focuses on.

2.7.1.1 – Supplier involvement and low time-to-market

It has been stated before that one of the main goals of companies getting involved in supplier involvement projects is to achieve reductions in the development time of their products, namely through parallel development of components or assemblies (e.g. Petersen et al., 2005; Wagner & Hoegl, 2006; Wynstra et al., 2003). It has also been mentioned that Eclipse has attained an outstanding and unprecedented performance in the time-to-market of its launching product, the Eclipse 500 VLJ. If it is expected that supplier involvement reduces the time-to-market of the new product, then the alternative hypothesis should express a negative relationship between these two variables. The alternative hypothesis relating supplier involvement with low time to market is then:

H1,A : Supplier involvement has had a negative relationship with time-to-market in the Eclipse 500 development project.

Conversely the null hypothesis regarding this prediction may be formulated as:

H1,0 : Supplier involvement has had no relationship or a positive relationship with time-to-market in the Eclipse 500 development project.

2.7.1.2 – Supplier involvement and development cost reductions

It has already been stated in the introduction that one of the most noteworthy aspects of the Eclipse 500 is its market-leading low purchase price together with its low operating costs (e.g. Eclipse Aviation, 2006a, 2007a, 2007b). This indicates that a low cost base must have been achieved by Eclipse Aviation in the development and production of the airplane. One of the commonly stated goals of supplier involvement is to reduce development costs (Weele, 2005). It is therefore interesting to check whether supplier involvement played an important role in obtaining development cost

36 reductions in the Eclipse 500 project. It is expected that supplier involvement has helped to achieve development cost reductions in the project. The alternative hypotheses may then be phrased as:

H2,A : Supplier involvement has had a positive relationship with the development cost savings in the Eclipse 500 project.

As stated before, the null hypothesis for this prediction encompasses all the other possible outcomes regarding the relationship between these variables.

H2,0 : Supplier involvement has had no relationship or a negative relationship with the development cost savings in the Eclipse 500 project.

This pair of alternative-null hypotheses ends the set of hypotheses involving predictions of influence of supplier involvement on two aspects of the performance of this radical innovation.

2.7.1.3 – Suppliers’ specific investments and level of supplier involvement

This prediction was strongly based on the second hypothesis present in Table 2.6. This hypothesis, laid out and verified by the empirical data gathered by M. Song & Benedetto (2008), predicts a positive relationship between the specific investments of suppliers’ and the level of their involvement in the project. It has already been verified by a number of sources mentioned earlier in this work (e.g. Boavida, 2008) that supplier involvement was present in the development of the Eclipse 500. The prediction made by Boavida (2008) and that will be assessed in the present research is that specific investments made by suppliers in this project have influenced positively the level of their involvement with Eclipse Aviation. The alternative hypothesis may be phrased as:

H3,A : Supplier specific investment has had a positive relationship with the level of supplier involvement in the Eclipse 500 development project.

The null hypothesis regarding this prediction is expressed as follows:

H3,0 : Supplier specific investment has had no relationship or a negative relationship with the level of supplier involvement in the Eclipse 500 development project.

2.7.1.4 – Qualification of supplier abilities and level of supplier involvement

The final prediction that is going to be assessed in the present research is also strongly based in a hypothesis laid out and validated by the empirical data gathered by M. Song & Benedetto (2008). In the third hypothesis shown in Table 2.6 the authors forecast and then validate that, in their set of data, supplier qualification done by the new venture has resulted in an increase in the level of involvement of the suppliers in the development project of the radical innovation. The final pair of hypotheses of this thesis predicts that supplier qualification done by Eclipse Aviation has led to an increased

37 involvement of the suppliers in the development project of the Eclipse 500 VLJ. The alternative hypothesis regarding this prediction may be written as:

H4,A : Supplier qualification has had a positive relationship with the level of supplier involvement in the Eclipse 500 development project.

The null hypothesis may be phrased as:

H4,0 : Supplier qualification has had no relationship or a negative relationship with the level of supplier involvement in the Eclipse 500 development project.

This concludes the set of hypotheses which validity this thesis aims to assess. Figure 2.7 shows a schematic representation of the hypotheses, each one displayed as an arrow connecting the variables it concerns.

Figure 2.7 – Diagram of the relative position of the hypotheses and the variables they refer to.

However, as stated above, the problem laid out earlier in this section is going to be tackled both by the use of hypotheses and open-ended research questions. The following paragraphs deal with the research question that is going to be analysed in this work.

2.7.2 Research Questions

Research done around the building of hypotheses and their proof or refutation can be powerful, as described before. It is usually connected to deductive reasoning, where one simply finds evidence or not for predictions done before the study. However, and as will be seen later in the research methodology section, deductive research also has its drawbacks. In order to gain relevance, this study addresses a more general research question.

In the description of the research problem it was mentioned that, besides aiming to validate hypotheses dealing with supplier involvement in this case of radical innovation by a new venture, this

38 work aims to gather insight from the practices of Eclipse Aviation that may be of use for future research and also future managerial practices. A research question is more adequate to deal with this issue since gives the researcher more flexibility (Eisenhardt & Graebner, 2007), and though it only makes sense to build this research question in an open-ended form. This need for flexibility determines that this part of the problem is much better addressed by theory-building than by more deductive research.

A research question is used in the present thesis to complement the investigation done on hypothesis-testing. As said before, these hypotheses predict very specific relationships between specific variables; since this work aims to study the effects of supplier involvement on the performance of the Eclipse 500 development process, the research question underlines the commitment to keeping, throughout the research, a sharp eye out for other outcomes or effects of supplier involvement that are not specified in the hypotheses.

Q1: Which other outcomes and results of early supplier involvement in the Eclipse 500 development program were there detected other than the ones predicted by the hypotheses?

The statement of the research question concludes this section where the research problem, hypotheses and research questions were presented. The next section focuses on the research methodology that is going to be used to address the issues presented above.

2.8 RESEARCH METHODOLOGY

The choice of the methodology used for the research is one of the central issues of a study, and is determinant for its validity. In order for the choice of methodology to be adequately grounded some theoretical aspects have to be addressed before the actual experimental methodology used in this study is explained. The theoretical aspects are explained in the first three subsections, while the methodological choices done for this thesis are laid out in the fourth and last one.

2.8.1 Case studies

It has been stated in several occasions in this thesis that the objective is to analyse the development of the Eclipse 500 VLJ as a case study of supplier involvement in a radical innovation by a new venture. However the meaning of the expression case study should be clarified before going forward with the research methodology; that is the aim of this subsection.

A great number of authors have attempted to define what a case study is; let us analyse some of those definitions. Patton (2002) cites in his book a definition of case study written by Stake (1995) that defines it as the study of the particularity and singularity of a single case. Trochim (2005, p. 125)

39 writes that a case study is an intensive study of a specific individual or specific context. Eisenhardt & Graebner (2007, p. 25), while stating that cases may be historical accounts but are more likely to regard recent events, cites a source (Yin, 1994) defining that case studies are rich, empirical descriptions of particular instances of a phenomenon that are typically based on a variety of data sources .

All these sources place an emphasis on the aspect that a case study aims to focus exclusively on one reality only contrarily to, for instance, an industry-wide empirical study. Usually the case that is to be studied is not chosen randomly or because it is representative of a larger class but because it has specific characteristics that are of interest to the researcher (Eisenhardt & Graebner, 2007); the choice of a single case provides an opportunity to explore a significant phenomenon under rare circumstances.

It should be however noted that a case study is not a full methodological choice in itself but rather a choice of the object of study (R. E. Stake, 1994). The choice to do a case study reports to committing to carefully study one reality, as said in earlier paragraphs of this section. From this point the researcher must choose what methods and paradigms are to be used to best fulfil the goals of the case study at stake.

Several authors have made considerations on research choices that are usually done when dealing with case studies. According to Eisenhardt (1989) and also Trochim (2005) it is common practice to combine several data collection methods including questionnaires, observations and archives. The goal of the study itself is also not definite, as according to the same source case studies may strive for different aims. Among these there are descriptive case studies, ones that aim to generate theory and also the ones that aim to test previously generated theory. R. E. Stake (1994) categorises case studies as cases with an intrinsic and an instrumental interest. Intrinsic case studies are the ones where the research motivation is to understand as deeply as possible the complexity and uniqueness of a single notable reality; instrumental case studies are those where aim is to use the case (or cases,) as an instrument to build theory that strives towards generalisation. According to the same author it is only in rare occasions that a specific case study falls cleanly into one category.

Even though case studies focus on the particularities and singularities of single cases, it is common that a case study, especially of the theory-building type, encompasses more than one actual case. This is called a multiple-case study, and literature (Eisenhardt & Graebner, 2007) states that it is advantageous from the point of view of theory building. The same source defends that multiple-case studies are stronger in aspects of generalisation, as the researcher is less likely to be put in the wrong direction by small particularities of each case, rendering the resulting theory more global. The contradiction with the arguments and descriptions earlier in this subsection is only apparent, as a multiple-case study still thrives to look deeply into the particularities of each of the individual cases it encompasses. Furthermore, the number of cases is usually much smaller than the number of instances used for an empirical hypothesis-testing study (e.g. M. Song & Benedetto, 2008). Since this thesis is a single-case study (as will become clear once the research methodology to be used is laid

40 out), from this point onwards the expression “case study” is used with the same meaning as “single- case study”, and the expression “multiple-case study” will be used where necessary to differentiate from the single-case variant.

Additionally, a case study that is intended to be of a single case is often found to comprise many smaller cases; these smaller cases are called nested cases. Patton (2002) uses a very clear example to illustrate this fact. A case study may be built with the intent of studying a specific community living in a village. However this case study is very likely to be made up of much smaller cases, for instance each of the individuals or families living in that village. In order for this case to be studied efficiently the sampling has to be done taking into account the nested cases inside the larger case study. The larger case encompassing the nested cases is called the primary or macro case (Patton, 2002). It should be further emphasised that a collection of nested cases within a case study is structurally different from a multiple case study. The multiple case study uses several cases to establish comparisons and strive for larger and safer generalisations, through triangulation (R. Stake, 1995), while the single case study is more likely to be of the descriptive type and use the nested cases in order to obtain a better and more precise description of its particular reality (Patton, 2002).

The path towards deep understanding of a specific reality as opposed to an industry-wide empirical research has several advantages as explained before, but it does not come without its costs. The main drawback of this type of study is that the generalisation potential of the conclusions is likely to be much more limited than in the aforementioned industry-wide empirical study. However the aim of case studies is not always to build general theory; it is often found that they play the opposite role. Case studies are frequently valuable in establishing limits to previously built general theory, in refining aspects of that theory for particular situations, and in suggesting details for further investigation (R. Stake, 1995). The researcher should always bear this in mind when presenting the conclusions of a case study, as not to inadvertently deceive readers that, not having the same understanding of the case as the researcher, may be allured into making easy but possibly invalid generalisations.

In case studies, it is usual for the research questions or hypotheses to be either built a priori or, on the other hand, be crafted as the study progresses and the data is analysed by the researcher, as a consequence of that research (Eisenhardt, 1991); a valid option is also using a mixture of the two. The building of specific constructs a priori and the use of the case to be able to prove or refute them is closely connected to the deductive reasoning. The use of open questions, built either a priori or as the research progresses, connected to an attempt of generalising from insight obtained from the case, are closer to the inductive way of reasoning, giving the researcher much more flexibility to make the most out of the findings. A discussion involving inductive and deductive reasoning, and their role in research, is done in the next subsection.

41 2.8.2 Reasoning and Research Paradigms

The general objective of research is to use certain methods and tools to generate new knowledge or confirm existing one in new contexts or applications. Research paradigms represent the different philosophies the researcher uses to position towards the object of the research and to its conclusions, and condition the methodological choices used in the study. In the words of Guba & Lincoln (1995, p. 107), a paradigm may be viewed as a set of basic beliefs (or metaphysics) that deals with ultimates or first principles. The inductive and deductive ways of reasoning represent two fundamentally different ways of drawing conclusions and end results.

Deductive research generally consists of working from a general statement or theory and narrowing it down to a particular situation (Trochim, 2005). The work usually starts with broad questions or a broad problem. From this broad situation the researcher works towards a narrowing of that general situation; this ultimately ends with specific predictions that are written as pairs of alternative/null hypotheses as the ones exposed before in this study. Observations are then made in an attempt to gather sufficient insight into one particular situation in order to objectively confirm either the alternative or the null hypothesis for each prediction. The original theories are then either confirmed or refuted.

One of the major strengths of deductive reasoning is its logic strength: if done correctly, that is without fallacies, if the general statement is true then the particular statements derived from it are necessarily true. The opposite also applies: if a specific conclusion taken without fallacies from the general statement is proven to be untrue, it logically follows that the general statement is also not true. This logic strength is in the essence of one of its major drawbacks: that it fails to produce new theories.

The work of producing completely new knowledge is the domain of inductive reasoning. Being regarded as the opposite of deductive reasoning, inductive reasoning works from a finite number of observations to reach a general conclusion or theory encompassing those observations (Trochim, 2005) that is also valid for other situations that are comparable to the ones in study. Contrarily to the deductive reasoning, in this situation the researcher works from the particular and aims to broaden similarities and patterns found between those particular cases to reach general conclusions.

The already mentioned fact that inductive reasoning builds completely new theory is the major strength of this form of reasoning. However, unlike in deductive reasoning, a set of true particular hypotheses together with a valid reasoning do not lead surely to a true general conclusion. The researcher should attempt his best efforts to achieve a valid general theory, but it is likely that the validity of the general theory will only be established later with more observations and other studies, both of the inductive and deductive type.

Even though deductive reasoning is more closely connected to the testing of hypotheses made a priori and inductive reasoning to the answering of more general open ended questions from a set of hypotheses, in qualitative case studies such as this one the boundary layer between them is not completely clear. Though, in interpreting the data in order to assess hypotheses some amount of induction may be necessary (as not all the required data may be available) and clearly deduction is

42 important in the answering of a research question. The explanation of the choice of paradigm of this research that follows will render this aspect more clear.

An important methodological choice in every study is the research paradigm in which the research is to be positioned. A very large base of discussion on research paradigms and each one’s strengths and weaknesses is available in literature (e.g. Guba & Lincoln, 1995; Schwandt, 1995) and it is out of the scope of this work to recreate that discussion. It is however relevant to carefully present the research paradigm that this research leans closest to: the post-positivism. This is to be done in the remainder of this subsection.

According to Guba & Lincoln (1995) the post-positivism results from a modification of the positivism. In brief, the positivism assumes that the reality is objectively apprehensible and thus employs a hypotheses-testing experimental methodology, mostly quantitative, to reach findings that are assumed to be absolutely true. It is easy to see that this paradigm is of very limited application to a qualitative study like the one that is proposed in this thesis. It has however several items that with slight modifications may render very useful for the study at hands, like the hypothesis-testing methodology.

Following the description done by Guba & Lincoln (1995), the post-positivist position relaxes some of the most radical aforementioned assumptions of the positivist paradigm. Similarly to the positivist paradigm, the post-positivist assumes the reality exists, but it differs from the positivist position since it recognises that the reality is only imperfectly apprehendable due to the limitations of the human researcher. The reality is apprehended as perfectly as possible when subject to a wide variety of critical observations, from different researchers.

In post-positivism, despite a large focus being put on objectivity, it is no longer assumed that predictions may be clearly and definitely asserted as true or not true. It may be stated that evidence was found supporting the alternative hypothesis or of the null one, but the aforementioned limitations of the human researcher do not allow for a definitive confirmation. If a perfect researcher would exist, with a perfect methodology, then a dualist interpretation with absolute confirmation of either the alternative or the null hypothesis would be possible. Emphasis is put on the confrontation of the results with the critical community in order to obtain a stronger confirmation or refusal of a certain prediction.

In terms of methodology, the uncertainty connected to the limits of the human researcher mentioned before leads to the use of triangulation to achieve higher degrees of safety in the conclusions drawn. The assessment of the truthfulness of each prediction is to be done to the highest extent possible using several data sources to achieve stronger results, and not to be deceived by mistakes done in each data source. The researcher has to bear in mind that even though these efforts are important for the raising of the quality of the results, the inherent limitations and mistakes attributed to the human researcher are always determinant in the impossibility of drawing definitive and absolute conclusions from the research.

43 The following subsection deals with the aspects used to assess the quality of the research that best applicable to the research paradigm used in this thesis; they are very much in line with the ones usually suggested for a post-positivist researc h paradigm.

2.8.3 Quality Assessment of the Research

The critical evaluation of the quality of research is one of the responsibilities of the author of any research work. Different research paradigms sport different measurements and goals in terms of qual ity. Since, as said above, this thesis leans closest to the paradigm of post -positivism the quality assessment done for this research is also likely to be close to the one done in a post -positivist paradigm. Four different types of validity, as laid out by Trochim (2005) , are to be explained below. According to this author, the four types of vali dity build on each other as represented in Figure 2.8, with the most basic one being conclusion validity and the others requiring the preceding ones to be feasible.

Conclusion Internal Construct External Validity Validity Validity Validity

Figure 2.8 – The four types of validity of Trochim (2005).

Conclusion validity is the most basic validity that results of a research work may present. As explained above, all of the hypotheses laid out in this work concern relationships between two variables. Conclusion validity looks at the legitimacy of concluding about the existence or not of relationships between dependent and independent variables. Two types of errors may be made: concluding that there is a relationship between two variables when there is n ot, and concluding that there is no relationship between two variables when in fact there is. When using statistical treatment of quantitative values, p-value and significance level procedures are helpful in concluding about the conclusion validity of the results (e.g. Montgomery & Runger, 2003) . However when using mostly qualitative data the best way to avoid threats to conclusion validity is the triangulation of information and critical perspective from the researcher when analysing and discuss ing data and drawing conclusions.

If conclusion validity is high enough on a certain reasoning, and it is believed to a certain degree that a relationship exists between two variables and that the relationship is of the causal type, internal validity becom es relevant. As defined by Trochim (2005) regards the approximate truth of the inferences do ne in the study. It is internal because it only regards the legitimacy of the inferences done inside the study, between the variables analysed in a certain period of time that the study refers to. A lack of internal validity corresponds to concluding that the relationship between two variables is causal when it is not, even though some correlation exists between them.

Construct validity regards the appropriateness of the operationalisations used to reach conclusions about the theoretical constructs that are on their basis (Trochim, 2005). Theoretical constructs are impossible to measure in general and, in order to gain insight into them, operationalisations of those constructs are made via research instruments, such as, for example, surveys or interviews. A certain work has construct validity if the operationalisations used are appropriate for the problem at hands and permit to reach valid conclusions about the underlying theoretical constructs.

External validity is the type of validity that deals with generalisability to a larger extent. Conclusions of a study are said to have external validity if they hold true for different realities in different times (Trochim, 2005). While external validity is one of the major goals of many research designs and approaches, this is not necessarily the aim of all case studies. As stated before on the subsection regarding case studies, some aim to build theory and consequently are largely focused on obtaining conclusions with external validity. However for those that strive for a deep understanding of a specific reality, external validity is not a very important attribute for the conclusions. The present thesis is included in this second type, where external validity does not play a central role.

Guba & Lincoln (1995) state that the quality criteria for research done from a post-positivist paradigm are the items of external and internal validity, and also of reliability and objectivity. External and internal validity were already described above. Reliability is connected to the dependability of a certain measurement, more specifically to whether or not a repetition of such measurement with an unchanged measured phenomenon would result in a similar measurement. This concept is deeply involved with the above defined one of construct validity and is implicitly a part of it. Only a dependant, and thus reliable, measurement or operationalisation may provide an accurate measurement that may lead to true conclusions about the underlying theoretical construct.

Finally objectivity regards the distance of the observer and his subjective factors from the measured content and the results of the research. Under the post-positivist paradigm, full objectivity is never possible due to the natural flaws inherent to the human researcher. Furthermore, complete distancing of the researcher from the results is not very desirable in a study done from this paradigm. The importance of critical analysis of the results has already been described before; consequently total distancing between the subjective factors of the researcher and the results of the study is neither possible nor desirable.

In this subsection six measurements of validity have been described; the first four were presented by Trochim (2005) in his study of research methods, and the last two were cited by Guba & Lincoln (1995) as appropriate for research done from a post-positivist paradigm. Their application in assessing the quality of this thesis is discussed in the next subsection.

45 2.8.4 Experimental Research Methodology Used in this Thesis

The section on research methodology, of which this subsection is a part, began by saying that before the actual methodological choices for this work were presented some theoretical aspects needed to be addressed. This was done in the three previous subsections, while this one is devoted to the methodological choices themselves.

2.8.4.1 – The Choice of a Single-Case Study Approach

The first step towards defining the methodology used in this thesis is justifying the choice to do a case study. As said in the first chapter of this work, the relevance of the study comes in a large part from the impressive performance and achieved by Eclipse Aviation and also from their innovativeness. The aim of the thesis is to study the development of the Eclipse 500, by testing hypotheses concerning causes of this performance, and also by using broader research questions in order to look for unexpected facts and lessons that can be learnt from this company.

The choice of a case study is the logical consequence from the goals stated in the preceding paragraph. The focus of this work is a single reality, contrarily to studies that look for patterns between different situations in order to establish theories with a large emphasis on generalisation. Looking further in detail into this situation, the aim of understanding the particularities and singularities of Eclipse Aviation is in the basis of the choice for a single-case study design. A multiple-case study would be more appropriate to a study, for example, of Eclipse Aviation together with a small number of other firms with comparable attributes. One of the major drawbacks of single-case studies pointed out in literature is its weakness in the realms of generalisation. However for this thesis this is not an issue, as it has already been seen that this work does not strive for generalisation but for an accurate analysis of Eclipse Aviation’s reality.

It will be seen later in this section that several sub-assemblies of the Eclipse 500 VLJ have been selected for an individual analysis. This does not mean that this study is designed as a multiple-case study but rather that several nested cases have been looked into in order to gain better insight into the single case that is being addressed.

2.8.4.2 – Research Paradigm and Quality Assessment

A discussion of the post-positivist paradigm has already been done earlier in this section. The goal and method of this work roughly fits into this paradigm’s frame, as it generally regards the explanation of some aspects of the Eclipse 500 supply chain management through, namely, the testing of hypotheses. A positivist position would assume that if the hypotheses were to be verified they would be acceptable as facts, but the post-positivist point of view only sees non falsified hypotheses as probable facts. Furthermore, the post-positivist position regarding knowledge being seen as an accretion process (Guba & Lincoln, 1995) where each development represents a building block is

46 also in tune with the philosophy behind this work, that uses previous research to formulate hypotheses that may either or not be verified in the case being studied.

The research question being used in this work is one of the aspects where it differs from a purely post-positivist paradigm, as this model contemplates only research done through hypothesis-testing and not the answering of open research questions.

The measurements of quality of research are however slightly different from the ones cited by Guba & Lincoln (1995) as pertaining to post-positivism. These authors state that the quality measurements for this paradigm are internal and external validity, reliability and objectivity. The four types of validity presented by Trochim (2005) are considered more adequate considering the scope and goal of this work.

The first three types of validity presented by the latter author are conclusion validity, internal validity and construct validity. These three types are very relevant in the assessment of the quality of this research work. Conclusion and internal validity are related to the correctness of the conclusions taken from the measured results. Construct validity assesses the adequateness of the operationalisations (in this case the information gathering processes and the research analysis) to provide relevant knowledge about the theoretical constructs that are aimed to measure.

External validity concerns the generalisation of the conclusions reached in this study to other realities in different times. It has already been seen when discussing the choice for a single case design that broad generalisation is not one of the goals of this work, as the intent is on describing the particularities of the specific reality of the supplier involvement in the development process of the Eclipse 500 VLJ.

In order to give the reader a global picture of the research methodology before going further with its details, Figure 2.9 depicts the general research process used in this study. A detailed explanation of the steps to be taken in the process follows.

47

Direct Contact Public Information

• First • Press Releases Questionnaire • General data • Second from Website Questionnaire • Brochures given to Buyers

Gather Information Gather Information Gather

H1

H2 Q1

H3 MoreInductive MoreDeductive Test Hypotheses H4 Answer Question

Conclusions Discussion

Figure 2.9 – General schematics of the research methodology used in this thesis.

2.8.4.3 – Nested Cases

The first methodological choice done for this thesis after deciding that it should be built as a case study was how to test the hypotheses and look for answers to the research question laid out previously in this chapter. The supply chain management of the Eclipse 500 is a very complex process; consequently it was decided to look carefully into four assemblies present in the final product. The assemblies that were individually addressed are:

1. Avio NG Avionics Suite : this advanced avionics package integrated by Eclipse Aviation features individual components made by Innovativ e Solutions & Support, Chelton Flight Systems, Garmin International and PS Engineering Inc (Eclipse Aviation, 2007f) .

2. Landing Gear Assembly : the landing gear assembly was produced and delivered to Eclipse Aviation by Mecaer (Eclipse Aviation, 2004g).

3. Engines : the engines featured in the Eclipse 500 are PF610F turbofan engines developed and produced by Pratt & Whitney Canada specifically crafted for the needs of this aircraft (Eclipse Aviation, 2003).

4. Nose Assembly : this component was built specifically for this aircraft by ENAER (Eclipse Aviation, 2004c).

After these units of analysis had been chosen the next step was to choose how to gather the required information from the company.

2.8.4.4 – Information Gathering

The information gathering process was divided into two broad areas (Direct Contact and Public Information), as suggested by the upper portion of Figure 2.9. Direct Contact contains the information that was obtained through e-mail exchange with Eclipse Aviation staff. While the literature review progressed and after the results of the first questionnaire were seen some information gaps were identified. This led to the creation of a second questionnaire that was addressed by e-mail to the same people. A more detailed description of this process is featured in section 3.1 of the following chapter, when analysing the respondents and replies to the questionnaires.

Both questionnaires, attached to this thesis as Annexes I and II, were divided into several sections each one corresponding to one assembly of the list mentioned above, and five-point response formats (integer scales with five discrete values) were used in every question. The only exception to the usage of these response formats was a last section, present in both questionnaires, where respondents were encouraged to add any further comments that they felt were relevant about cooperation with the suppliers in this project.

Trochim (2005) defends that questionnaires should be kept as short and easy to reply as possible, keeping in mind the information needs of the researcher; this is especially true in the case of this work, as the connection to the respondents is weak and if the questionnaires required too much of their time it is quite likely that response rates would be too low. Following recommendations from the same source, the beginning of the first questionnaire featured very easy questions (such as duration of working relationship with the company or age group) and left the possibly more difficult ones for subsequent sections; the open ended question was placed last in the questionnaire in order to gather possible comments or insights that the previous structured response format questions may have triggered or recalled in the respondents.

49 In the second questionnaire, taking into account that is was both shorter than the first one and shared a similar structure to its predecessor, and that the respondents were the same, the first section with more personal (and easier) questions was removed as it was no longer considered necessary. It was specifically stated in the introduction that the second questionnaire was a follow up of the first and intended only to fill some information gaps that had been identified. A detailed analysis of the objectives of each question, together with the replies obtained to it from the collaborators at Eclipse Aviation is featured in section 3.1 of the third chapter of this thesis.

In parallel to the information gathered through direct contact by the process described above, Figure 2.9 shows that public information was also used for the research and that it mainly comes from three different sources. The first and main one is made of the press releases made available on a live basis by Eclipse Aviation on their website (Eclipse Aviation, 2008a). Due to the fact that Eclipse Aviation issues press releases for very diverse issues, many of which completely out of the scope of this work, filtering criteria were defined in order to select the press releases to be analysed.

The first criterium is that only press releases issued between December 10, 2003 and March 31, 2008 were analysed. Secondly, only press releases made available in Eclipse Aviation’s website were available. Finally, and due to the large range of issues mentioned in these documents, a final selection was done based on the title of the press releases. The ones that mentioned or suggested partnerships, relationships, suppliers, customers and innovations were considered and analysed. Examples of press releases left out are for example the ones announcing that Eclipse would be sponsoring a certain event or developments in court issues related to the company.

The website of Eclipse Aviation is also very rich in information concerning various aspects of the Eclipse 500 VLJ. It features a large wealth of information regarding this product, and was also an important source of information for this work. Relevant information topics found on the website were namely, information on the development timeline of the product is available, price information, comparisons to other aircraft, and details on the operating philosophy of the aircraft.

The final item in the public information category of the information gathering section of Figure 2.9 concerns information that is not available to the general public but that one Eclipse 500 customer has made available to the author, through a personal contact. The information obtained here complements and expands some topics not thoroughly assessed in the website, such as operational details of the aircraft and of its innovative avionics solutions, and even if not directly used to test hypotheses or answer questions it is relevant to grasp a better understanding of the concept of the Eclipse 500.

2.8.4.5 – Testing Hypotheses and Answering Questions

One of the major challenges of the present work is how to effectively use information coming from a variety of sources, both direct and indirect, in order to maximise the validity of the conclusions drawn from it. If, on the one hand, the information gathered from the questionnaires is streamlined (due to

50 the use of the five-point response formats) and somewhat precise (as the questions are direct and were designed specifically for this research), on the other hand the press releases and information from the website are in a format that is less adequate for this work.

The questionnaires are likely to provide relevant information for the assessment of all the hypotheses laid out in this work, as well as the research question, since they were built specifically for this goal.

Information useful to the assessment of H 1 and H 2 is of a more general character and consequently more likely to be also present in the public data specified in Figure 2.9. H 3 and H 4 are more technical and of less interest to the general public; consequently it is less likely that useful information concerning them is available from sources in the public information group.

The framework of early supplier involvement in new product development presented earlier in this chapter (Wynstra et al., 2003) is used to organise the information coming from the public sources. By specifically looking for proof of existence or inexistence of the activities contemplated in the framework in the several nested cases analysed, one should gain insight into the level of supplier involvement used in each one.

The following chapter presents the results from information gathering and analysis carried out in an attempt to verify or falsify the hypotheses, thereby answering the research question.

51 Chapter 3 - RESULTS AND ANALYSIS

3.1 THE QUESTIONNAIRES

Chapter Two finished with the description of the research methodology used in this thesis. The present section looks in depth at the questionnaires answered by Eclipse Aviation staff. Firstly, a brief description of the respondents and the areas in which their replies focused is presented, together with their role inside Eclipse. An in-depth analysis of each question in the first questionnaire follows, with regard to the variables/constructs assessed and how those variables are measured. A brief outline of the answers given to that question is also provided. Finally, a similar analysis is presented for the second questionnaire.

3.1.1 Respondents and Replies

It was a very challenging task to be able to find respondents that would be qualified to provide the answers to the questionnaires about such a specific topic. A direct approach to Eclipse Aviation through a visit to the company was impracticable since it is headquartered in New Mexico, USA. A first attempt to contact the company was made through a contact at ETIRC (the company that is to distribute Eclipse Aviation products in Europe) but yielded no results. A second attempt was made through the e-mail addresses of Eclipse Aviation provided in its website, and an answer was obtained from the public relations department.

The contact was then forwarded to an employee with a leading role in the department of supply chain management that besides answering all the questions himself provided contacts of other people at supply chain management that were specifically connected with the assemblies of the airplane contemplated in the questionnaires; these are the Avio NG Avionics Suite, the landing gear assembly, the engines and the cockpit and fuselage skin panels. The first employee is referred to as the “leading role” while the others are referred to as the “specialised employees” in the remainder of this work. Two questionnaires were issued, with a similar structure, the second one presenting additional questions concerning items that were not known to be relevant at the time of writing of the first questionnaire.

Each questionnaire comprised a general section, with questions regarding the Eclipse 500 developing process as a whole, and four sections with similar questions asked about each of the assemblies of

52 the airplane mentioned in the previous paragraph; respondents were encouraged to skip parts if they did not feel qualified to answer them. In the end of the questionnaire there was an open ended section, entitled further remarks, asking the respondent to add any further remark considered relevant about the issues that the questionnaire deals with. The leading role employee replied to all the fields in both questionnaires, while the specialised employees in most cases replied to the general section and to the one directly addressing their field of work.

Before proceeding to the table with the response patterns a remark has to be made about the section concerning the skin panels. Due to a misprint a section concerned the cooperation with ENAER for the development of the cockpit and fuselage skin panels. However the skins are in fact built by Ducommun, while ENAER builds the nose assembly. Fortunately this proved not to be a problem as both respondents that answered this part made this clear in the remarks section and stated that their answers were given regarding ENAER and the nose assembly. Consequently, from here onwards, the answers to that question will be considered regarding the nose assembly and not the skins. Furthermore both respondents made a comment about the relationship with Ducommun regarding the skin panels, yielding information about that relationship.

Table 3.1 synthesises the information of who actually responded to each part of the questionnaires.

Table 3.1 – Response rate in both questionnaires.

First Questionnaire Second Questionnaire Positions General Specific Remarks General Specific Remarks

Leading Role Replied Replied to All Replied Replied Replied to All Replied

Avio NG Replied Replied Replied Replied Replied

Landing gear Replied Replied Replied Replied Replied

Engines Replied Replied Replied

Nose Replied Replied Replied Replied Replied Replied Assembly

As a result of the response pattern described above it is straightforward to conclude from the information in Table 3.1 that for each question there are at least two responses to compare, one from the leading role employee and one from the specialised employee that works in that area. The exceptions are the general sections, answered by every respondent, and the engine section of the second questionnaire where only the answers from the leading role employee are available. The lack of replies here is due to the fact that the specialised employee in the engine area claimed not feeling comfortable in answering the second questionnaire.

53 After a general look at the respondents and the response rates a thorough analysis of each questionnaire now follows; that is the subject of the following two subsections.

3.1.2 The First Questionnaire

This subsection delves into the first questionnaire, more precisely into the format, goals and answers to each of its questions. It is divided into the two main areas of the questionnaire: the general section and the section about specific assemblies of the airplane.

Before proceeding to address each question individually it is important to analyse the choice of response format for the questions in the questionnaire. The response format most commonly used in this questionnaire is an interval level 5 point response format (also known as a Likert response format) complemented with a semantic differential (Trochim, 2005). Respondents could choose an integer between 1 and 5 to answer each question, with the two extreme values representing opposite answers. Adjectives were attached to each number to help the respondent quantify his or her answer in a clear and consistent manner.

In a small number of questions (that will be identified when they are specifically addressed) a nominal response scale was used (Trochim, 2005). These questions have five response possibilities with an integer attached to each one like the Likert response formats mentioned in the previous paragraph as well as words appended to each choice. However the numbers are used solely for data processing as the ends of the scale do not represent opposite answers like in the previous case. The remarks section features an unstructured response format, where the respondent is free to write what he or she feels appropriate, or to give no answer at all.

This questionnaire was distributed via e-mail in December 2007 via a Microsoft Word document featuring blanks that the respondents had to fill in to answer the questions. The respondents then e- mailed back the completed forms to the author.

3.1.2.1 – General Section

Following the advice of Trochim (2005) the easiest questions were selected for the beginning of the questionnaire, in order to motivate the respondent to answer the rest of the questionnaire. Had the difficult questions been put in the beginning the respondent could feel the questionnaire was too difficult and give up from answering. This gains particular relevance in this work since the questionnaires have been applied via e-mail, with no personal contact whatsoever, making the response rates very dependent on the respondent’s will to cooperate.

The first question (I.A.1) asks the respondent about his or her age group; this information was not particularly relevant for this work due to the small number of replies to the questionnaire that were

54 possible to obtain. Nonetheless this straightforward question plays the aforementioned role of starting the questionnaire with a very easy and quick question.

Most of the respondents were in the 46-55 years old group with one being younger and another one being older than that.

The second question of this section (I.A.2) aims to gather information about for how long the respondents have been working at Eclipse Aviation. Since this work’s objective is to study selected aspects of the development of the Eclipse 500 VLJ the answers of an employee that would only have started working at Eclipse Aviation very recently would have to be looked upon with more scepticism. The goal of this question was to filter out those situations.

Fortunately all the respondents have been working at Eclipse Aviation for a period ranging between 2 and 4 years, so the possible problem of inexperience at the company (and consequent lack of knowledge about the development) is not an issue in this group of respondents. Since all the answers to this question were satisfactory it is needless to mention it in the remainder of the analysis.

The next question (I.A.3) asks about the subject’s opinion about the success so far of the Eclipse 500 project. It was put here in order to obtain information about how each respondent was feeling about the project and possibly correlate this information with the different respondent’s answers to the subsequent questions of this survey.

Rather interestingly all the respondents provided similar answers to this question, considering the Eclipse 500 project to be turning out very successful (level 4). This question, besides providing information that could be useful to answer the research questions, is also important since further questions are going to be asked that either explicitly or implicitly regard the success of the Eclipse 500 VLJ. Respondents that considered that this project was being unsuccessful would be less likely to give valid answers about the influence of cooperation with suppliers in that success. Since all respondents consider this project as being very successful the aforementioned problem is not considered to be an issue with this group of respondents.

Question I.A.4 asks the respondent to select on a Likert response format his or her opinion about to which extent was cooperation with suppliers a relevant in saving time during the development process of the Eclipse 500 VLJ, reducing its time to market. The time-to-market of the Eclipse 500 VLJ was, as already stated previously in this work, remarkably short for the standards in the passenger jet industry. Its outcome will certainly be useful for the analysis of the first pair of hypothesis laid out in the previous chapter, dealing with a connection between supplier involvement and time-to-market.

Three out of the five respondents considered the cooperation with the suppliers as very relevant (level 4) in reducing the time-to-market of the Eclipse 500 VLJ while one considered it somewhat relevant (level 3) and one exceptionally relevant (level 5).

The final question of the general section aims to assess to which extent the respondents consider the cooperation with suppliers as an important factor in gathering a large amount of advance orders for

55 their product. This question was motivated by a rather unexpected result pointing in that direction obtained in previous work done by the author (Boavida, 2008), and despite not being directly connected to any of the hypothesis-pairs provides additional insight for the answering of the research question.

A range of different answers were obtained to this question. The leading role employee considered that the cooperation with the suppliers was not important in gathering a large number of advance sales. Among the specialised employees, two out of four considered it somewhat important (level 3), one considered it relatively important (level 2) and one considered it very important (level 4).

This concludes the analysis of the first section of this questionnaire. The second section, featuring questions about individual suppliers, now follows.

3.1.2.2 – Specific Sections

As stated above, this questionnaire is split into a first section containing general questions and a second section containing questions about specific assemblies of the airplane. This second section is split into four parts, each one addressing one assembly and featuring five questions. The only difference between these four parts is the assembly they refer to, as the questions are phrased in exactly the same way. Due to the response pattern explained earlier in the present chapter only two answers are available to each question of the specific sections.

The first question (I.B.1) asks the respondent about which factor played the most important role in the choice of the supplier (or group of suppliers) that contributed to each specific assembly. Its goal was to determine whether either cost reductions or time saving were the most important reason for that choice of supplier. Besides those two options the respondent could choose that the supplier was chosen for its renowned brand, for its superior performance, or for other reasons.

The response format in this question is a nominal response format with five choices. The answer with the integer value 1 (renowned brand) does not represent an opposite of the answer with the integer value 5 (other issues) as in the Likert response formats; the figures here are just used to ease data recording and processing.

Regarding the group of suppliers involved in the Avio NG Avionics Suite both respondents stated having chosen this group of suppliers for the superior performance of their products. Concerning the landing gear, the dominant answer is that other factors determined this decision, as the leading role employee chose this option and the specialised employee in this area selected four options: superior performance of products, low cost, time savings and other issues. In what concerns the engines, the reason pointed out by both the leading role employee and the specialised employee was once again the superior performance of products. Regarding the nose assembly both respondents answered that low cost was the prime factor in the choice of the supplier.

56 The second question in this section of the questionnaire (I.B.2) asks about the level of cooperation with the suppliers in each of the assemblies addressed in this work. This information is of prime relevance for the conclusions of this work, as it aims to analyse certain aspects and effects of supplier involvement. In order to direct the respondent into what is meant by the level of cooperation, it was printed in the query that the answer with the value 1, no cooperation, corresponds to a pure build-to- print exercise where the development itself takes place completely at Eclipse. The opposite end of the scale, very high cooperation, associated to the number 5, corresponds to the situation where the supplier completely develops its product in order to match a set of specifications issued by Eclipse.

In what concerns the Avio NG suite, both the leading role and the specialised employees identified a high level of cooperation (level 4) with the suppliers involved in this assembly. The answers given by both respondents regarding the landing gear assembly are also equal for the two employees: the landing gear assembly was developed in a very high level of cooperation with the supplier (level 5). Concerning the engines both respondents answered that the level of cooperation was very high as well, with Pratt & Whitney completely developing the engines to match Eclipse’s needs. Finally, in the nose assembly, the leading role employee referenced a low level of cooperation (level 2) while the specialised employee referred no cooperation at all (level 1).

Because of the wording issue concerning the area of the nose assembly mentioned earlier in this chapter the respondents that dealt with that part wrote further remarks about Ducommun and the supplying of the skin panels. The leading role employee mentioned that the supplier was involved in the developing process, while the specialised employee stated that Ducommun was very involved in the development of the skin panels.

The third question (I.B.3) refers to the importance of supplier involvement in the achievement of the required quality standards for the purchased or developed goods. Despite not providing directly information for a specific hypothesis-pair this question yields significant knowledge in order to gain a better understanding of the relationship between this manufacturer and some of its suppliers in the development of this specific airplane.

Regarding the supplier involvement in the developing of the Avio NG suite, the landing gear assembly and the engines both the leading role employee and the specialised employee answered this question with a level of 5. This answer is printed in the questionnaire as corresponding to the cooperation with the suppliers being exceptionally important in achieving the desired performance and quality of these assemblies. In the case of the nose assembly the leading role employee stated that the cooperation with the supplier was only relatively important (level 2) in achieving the required performance and quality, whereas the specialised employee claims that there was no importance at all (level 1).

The fourth question (I.B.4) queries directly about the time savings obtained through the cooperation with the suppliers compared to the hypothetical case where Eclipse would have developed each assembly completely on its own. It was expected to gather data for the analysis of the first hypothesis pair laid out in the previous chapter, concerning the relationship between supplier involvement and

57 time-to-market. The semantic differential in the Likert response scale is here achieved with percentage of the total development time of each assembly. Values are in 20% ranges for the first four levels and a 10% range for the fifth one.

Concerning the Avio NG suite both respondents answered that the time savings were high, in the range of 60% to 80% (level 4) of the total development time of this assembly. In the cases of the landing gear assembly as well as the engines both employees agree in stating very high time savings, ranging from 80% to 99% of the total time (level 5). The cooperation in the case of the nose assembly led, according to both respondents, only to low time savings, between 20% and 40% of the total development time of this assembly (level 2).

Further information is given in the open ended section of the questionnaire about Ducommun, the supplier of the skin panels, in the area of time savings. The leading role employee mentions time savings much higher than the ones achieved with ENAER existed with this supplier, and the specialised employee states the cooperation contributed significantly to achieve time savings in the development of the skin panels.

The final question in this questionnaire (I.B.5) aims to gather information specifically for the second hypothesis pair laid out in the previous chapter, that looks for a connection between supplier involvement and development cost savings. It asks the respondent for his or her view of to which extent the cooperation with suppliers reduced development costs, and uses a response scale with a semantic differential similar to the one used in question I.B.4. The only difference between response formats is that where the aforementioned question used percentages of total development time, the one in this query uses percentages of total cost.

In both the Avio NG suite and the landing gear assembly there was one respondent answering that there were high cost savings (60% to 80% of total cost, corresponding to level 4) while the other one identified very high cost savings (80% to 99% of total cost, corresponding to level 5). Regarding the engines both the leading-role employee and the specialised employee considered that very high cost savings have been achieved. In the case of the nose assembly lower values were given, with the leading role employee answering that low cost reductions were achieved (0% to 20%, corresponding to level 1) while the specialised employee mentioned low cost savings (20 to 40%, corresponding to level 2).

Further remarks were made regarding the cost savings with Ducommun, the supplier of the skin panels. The leading role employee mentioned cost savings much higher than the ones achieved with ENAER and the nose assembly, while the specialised employee referred to significant cost savings with Ducommun.

58 3.1.3 The Second Questionnaire

The second questionnaire closely shares its structure with the first one; in fact it is just an extension of the first survey that concerns areas that were not known to be relevant at the time of issuing the first questionnaire. Most of its questions aim to draw knowledge that is important for evaluating the last two pairs of hypotheses laid out in the previous chapter.

This document mainly consists of a general section and specific sections about certain assemblies of the Eclipse 500, like the previous one. The general section features two questions that refer to the development process of the Eclipse 500 as a whole.

The four specific sections share the same five questions, but each one concerning a different assembly of the aircraft. The assemblies concerned in the questions are the same in both questionnaires. A final section also exists, featuring an unstructured response format where the respondent was encouraged to add any further comments about the matters dealt with in the queries.

In all the questions featured in this questionnaire the response format is a Likert response format with a semantic differential, which is similar to most of the questions in the first questionnaire. The questions were distributed to the same respondents as the first one by e-mail in February 2008 via a Microsoft Word document in which each respondent had to fill in the blanks to answer the questions.

Three out of the five contacted employees in Eclipse chose to send the completed document by e- mail to the author; one preferred having the questions asked by the author over the phone and a fourth one claimed not to feel comfortable in answering the questions. The respondent that claimed this was the specialised employee in the area of the engines. Consequently, and as shown in Table 3.1, only four respondents are available for the second questionnaire.

3.1.3.1 – General Section

The first question (II.A.1) asks the respondent about to the efforts the company has been being making to qualify its suppliers, before actually selecting them. The response format ranged from a level 1 (No efforts) to a level 5 (Structured formal quantification), with three intermediate possibilities in between. The outcomes of this question are very likely to be important in assessing the fourth hypothesis pair, looking for a connection between efforts to qualify the suppliers and supplier involvement in Eclipse Aviation.

A half of the respondents answered that formal qualification had been done (level 4) and the other half selected the answer corresponding to structured formal qualification of each possible supplier (level 5).

The second and last question of this section (II.A.2) regards the specific investments that the suppliers have been making in the relationship with Eclipse Aviation. In the same way that the previous question closely relates to the fourth pair of hypothesis presented in the previous chapter

59 this one is likely to yield important information in the evaluation of the third pair of hypotheses, that looks for a connection between supplier specific investments and level of supplier involvement.

Three out of the five answers obtained for this question signalled extensive investments (level 5) done by the suppliers in the relationship with Eclipse aviation, comparable to building specific production lines to meet the requirements of this manufacturer. The other respondent claimed that large investments had been made (level 4) comparable to specific worker training.

This ends the analysis of the general section of the second questionnaire, and a similar approach to its second section, regarding the specific assemblies, now follows.

3.1.3.2 – The Specific Sections

The second part of this questionnaire is organised in a similar fashion to the same part of the first questionnaire. Each subpart reports to a different assembly of the Eclipse 500 VLJ (the same assemblies addressed in the first questionnaire) and five questions, common to all the assemblies, are asked about each one.

The first one (II.B.1) asks, for each assembly, a similar question to II.A.1. It aims to determine, in each of the selected assemblies, which efforts were made by Eclipse Aviation to qualify the suppliers before selecting them. The response format was exactly equal to the one in II.A.1.

Both the leading role employee and the specialised one state that for the Avio NG avionics suite, as well as for the landing gear assembly, structured formal quantification occurred for the suppliers (level 5), involving quantitatively assessing the different capabilities of each option. As for the engines, where only the opinion of the leading role employee is available, this person also considered that structural formal quantification occurred with possible engine suppliers. In what concerns the nose assembly, the leading role employee also selected structured formal quantification whereas the specialised employee selected formal quantitative qualification (level 4).

The second question (II.B.2) asked the respondent about to which extent he/she considered that the efforts to qualify the suppliers were important in reaching the desired quality standards in the goods purchased. Despite not targeting any of the hypothesis-pairs directly, this question is important to grasp a better understanding of the impact of supplier involvement in the development of this aeroplane. The five-level response format features a semantic differential ranging from “Not important” (level 1) to “Exceptionally important” (level 5).

In both the Avio NG suite and the nose assembly the leading role employee considered that the efforts to qualify the suppliers were exceptionally important while the specialised employee considered they were very important, respectively corresponding to the levels 4 and 5 in the scale. Regarding the landing gear assembly both interviewees considered that the efforts were exceptionally

60 important; as for the engines, only the answer of the leading role employee was available, and this answer also matched a level of 5 in the scale.

The third question (II.B.3) concerns the opinion of the respondents about a possible connection between the efforts to qualify the suppliers and the levels of involvement achieved with them. The response format is exactly the same as the one used in the preceding question. It directly aims to gather information that is expected to be very relevant to the discussion of the fourth pair of hypotheses laid out in the previous chapter.

In the case of the Avio NG suite as well as in the one of the landing gear assembly both the leading role and the specialised employees answered with the highest possible response level, claiming the efforts to qualify the suppliers were exceptionally important in achieving higher levels of involvement with these companies. Concerning the engine the leading role employee answered with the highest option as well. Finally, in the question about the nose assembly, the leading role employee maintained a response level of 5, while the specialised employee opted for a level of three, associated with “somewhat important”.

The fourth question (II.B.4) of this section looks for the existence of specific investments done by the suppliers in each of the assemblies contemplated in the questionnaire. This question is very similar to II.A.2, with the only difference being that the aforementioned question targets the development project as a whole whereas II.B.4 targets each of the assemblies separately. The response format of this question exactly the same as the one used for II.A.2. This question is specifically important to enable a basic integrity check to be done to the answers obtained in the final question of this questionnaire.

Concerning the Avio NG suite, one employee answered with a level of 4, stating that large specific investments had been made by the suppliers involved in this assembly. The other employee opted for a level of 5, corresponding to extensive specific investments being made by these suppliers. Regarding both the landing gear assembly and the nose assembly, both employees state that the supplier made extensive specific investments in the relationship with Eclipse aviation; finally, regarding the engines, the only opinion available (from the leading role employee) is that this supplier also made extensive investments in its relationship with Eclipse Aviation.

The final question of the second questionnaire (II.B.5) inquires to which extent the respondents consider that the specific investments made by the suppliers contributed to higher levels of involvement with this company. It is clear that this question mainly aims to gather information relevant for the discussion of the third pair of hypotheses. The response format used here is the same as the one shared by II.B.2 and II.B.3.

In the area of the Avio NG suite one respondent considered that the specific investments were exceptionally important in reaching higher levels of supplier involvement (level 5) while the other one thought of them as very important (level 4). Concerning the landing gear assembly, both interviewees considered the specific investments done by the suppliers as exceptionally important (level 5) in reaching higher levels of involvement. The only answer available concerning the engines was also in

61 this sense, as the leading role employee also considered the specific investments done by the engine supplier as very important in reaching higher levels of involvement. Finally, in what regards the nose assembly, one respondent classified these efforts as exceptionally important in achieving higher levels of involvement while the other one only considered them as somewhat important (level 3).

The analysis of the section about specific assemblies of the second questionnaire concludes the analysis of the questionnaires applied to employees of Supply Chain Management at Eclipse Aviation. The next section will analyse the relevant press releases available in an attempt to draw further information from them that may be useful to analyse the hypotheses as well as the research questions.

3.2 THE PRESS RELEASES

This section is devoted to the analysis of the relevant press releases 3 with the goal of extracting useful information for validating the hypotheses and answering the research questions. Careful attention is paid to the specific nested cases that were individualised in the questionnaires. The framework on supplier involvement by Wynstra et al. (2003) is used to identify possible joint activities in the information provided in these documents.

In one of its press releases dating from 2007 (Eclipse Aviation, 2007f) Eclipse Aviation announces its partnership with suppliers for the delivery of the Avio NG avionics package. The suppliers mentioned herein are Innovative Solutions & Support, Chelton Flight Systems, Garmin International, Honeywell and PS Engineering Inc. It is stated in that press release that the several suppliers will be involved in developing the components that will compose this avionics suite, being Eclipse Aviation responsible for the integration: “Eclipse Aviation will continue to serve as the systems integrator for the overall Avio NG system, but has employed a best-of-breed strategy for the Avio NG partners.

Each supplier has “deep expertise in the specific Eclipse 500 component they will provide” (Eclipse Aviation, 2007f). This expertise, besides being relevant in the achievement of certain performance and quality criteria for the end product, comes together with built brand names of each supplier, that will be associated to the Avio NG package increasing its value. In this source Eclipse also mentions a desire for a long and successful relationship with each of the suppliers. It refers to the relationships with these suppliers as partnerships, a concept that in itself contains the notions of cooperation and mutual advantages.

Regarding the framework of Wynstra et al. (2003), activities (1.1) and (1.2) are certainly present, as well as all the activities of area (2). The management area (3) corresponds to the application of area (1.1) to a specific project, so one can say that it is also present. Information to state which specific activities correspond in Eclipse Aviation to the generic activities defined in the model is not available.

3 The relevance criteria were explained in section 2.8.4.4. of the previous chapter.

62 Eclipse Aviation also refers to the partnership with Mecaer for the development and procurement of the landing gear (Eclipse Aviation, 2004g). Not much is said about the relationship between Eclipse Aviation and its landing gear supplier. The company states in the same source that “Mecaer's aeronautic expertise is in the design, development, manufacture, and certification of primary components including (…) landing gears (both wheeled and skid)” (Eclipse Aviation, 2004g). Without specific expertise in the area of landing gears, it is very likely that Eclipse Aviation contacted Mecaer with the purpose of leveraging their knowledge about this specific assembly of the aircraft, thereby adding value to the final product.

Specifically for the procurement of the landing gear, in the area of product development of the framework by Wynstra et. al. (2003) activities (1.2) and (1.4) were surely present with Mecaer. All the activities in areas (2) and (3) were also present, with a special attention being paid to (2.4) and (2.5) to make the most out of the specific knowledge possessed by this supplier in the area of cooperation.

Pratt & Whitney Canada was the supplier selected by Eclipse Aviation to provide the engines that power its aeroplane (Eclipse Aviation, 2003, 2004e, 2005a). Being certainly a strategic product for the Eclipse 500, under the definition stated by Kotler (2004), failure to achieve the desired standards for this product could bring heavy losses to the project, so bringing in a reliable supplier is of the utmost importance in the case of the Engine.

In the year of 2003, when Eclipse Aviation announced its engine supplier, the performances of this assembly led to a general increase in the performance of the Eclipse 500 (Eclipse Aviation, 2003); the CEO of Eclipse Aviation is quoted in the same source as saying “The specifications of the PW610F turbofan, P&WC's vast turbine expertise and its leadership in this promising new market make this solution ideal for Eclipse customers and stakeholders.” Furthermore, these two companies also joined efforts in the area of the optional warranty program targeted at business operators, announcing a partnership bringing additional coverage for customers willing to acquire so (Eclipse Aviation, 2005a).

In addition, Eclipse Aviation released a list of suppliers that it considers deserving of recognition for extraordinary performance (Eclipse Aviation, 2004e); among seven other suppliers, Pratt & Whitney Canada is recognised as having achieved this level of results. The CEO of Eclipse aviation mentions “These suppliers have (…) been instrumental in helping us achieve our goal of resuming flight test of the Eclipse 500 by the end of this year” (Eclipse Aviation, 2004e), clearly connecting its relationship with these suppliers as fundamental in achieving time savings in the development of this aircraft.

The general activities described by the model of supplier involvement provided by Wynstra et. al. (2003) that were present in the procurement and involvement with the supplier of the landing gear are also the most important ones regarding the contracting of the engines from Pratt & Whitney. The recognition of the extraordinary performance achieved by this supplier published as a press release clearly consists of an evidence of the presence of the general activities (2.3) and (2.5) inside the area of supplier interface management.

63 ENAER was the selected supplier to produce and deliver the nose assembly of the Eclipse 500 VLJ (Eclipse Aviation, 2004c). In the press release where the selection of this supplier is mentioned Eclipse Aviation also speaks about Ducommun, the selected supplier for the nose and fuselage skin panels, and the most of the information provided concerns at least these two suppliers.

Eclipse Aviation describes in its press release ENAER as a company with over seventy years experience in aviation and one of the most important aeronautical centres in Latin America. One of the main objectives of the involvement with this supplier is that of leveraging its long technical experience in its area. Similar objectives are likely to be present for the relationship with Ducommun, as mentioned in the same source. In this press release Eclipse Aviation also states that its team of suppliers share the same vision including “dramatically changing the economics of business aviation” (Eclipse Aviation, 2004c), hinting that its suppliers must share the cost reducing views of Eclipse Aviation.

Specifically regarding the nose assembly provider, and since it is headquartered in Chile, it is said that “For ENAER this contract represents a significant opportunity to expand the company's presence in the American aviation industry” (Eclipse Aviation, 2004c). It is worthwhile to note that while in several other press releases Eclipse Aviation refers to the relationships with its suppliers as partnerships (e.g. Eclipse Aviation, 2004e, 2006c, 2007f) it only mentions a contract with ENAER, possibly suggesting lower levels of involvement.

Regarding the development activities in the framework of Wynstra et al. (2003) no specific information is available in the press releases to point out which activities were present in the relationship with ENAER for the procurement of the nose assembly. Once this supplier was selected, activities (2.1) and (2.5) were certainly present with the objective of better leveraging the technical capabilities of this supplier (activity 2.5). Activities (3.1.3), (3.1.4), (3.2.1) and (3.2.2) were also present in order for a satisfactory nose assembly to be produced, matching the needs of Eclipse Aviation.

Different suppliers other than the four that are specifically addressed in this study are also mentioned in the press releases, even including ones that do not contribute with actual parts to the Eclipse 500 but that are fundamental in the operationalisation of Eclipse Aviation’s vision. One example is Castle & Cooke, who is providing the premises for the location of Eclipse Aviation service centres and doing the maintenance of Eclipse 500 aircraft (Eclipse Aviation, 2006b). One further example of this type of suppliers is the group of partners that are teaming up with Eclipse Aviation to enable it to offer its JetComplete package. This service expands the Eclipse 500 ownership experience by offering a wide range of additional services, ranging from fuel discounts to flight planning support, with these services being offered not only by Eclipse Aviation itself but by selected partners (Eclipse Aviation, 2005a, 2006c).

Table 3.2 summarises the information gathered from the press release analysis laid out in the present section.

64 Table 3.2 – Summary of data gathered from the press releases about the four nested cases in study.

Relevant activities of Assembly Suppliers Additional Remarks Wynstra et. al. (2003)

Innovative Solutions & Added value to the Support, Chelton Flight (1.1), (1.2) are certainly Eclipse 500 results from Avio NG Avionics Suite Systems, Garmin present, as well as the the integration by Eclipse International, Honeywell, whole areas (2) and (3) Aviation of each supplier’s PS Engineering Inc. specific expertise.

(1.2), (1.4), as well as the The supplier has large whole areas of (2) and experience in its area that Landing Gear Mecaer (3). (2.4) and (2.5) are Eclipse expects to likely to have been leverage. particularly important.

Similar to the landing gear. The public The partnership included recognition of not only supply of engines Engines Pratt & Whitney Canada extraordinary but also other services, performance indicates the such as additional presence of (2.3) and warranty. (2.5)

The most relevant ones The word “partnership” is are likely to be (2.1), Nose Assembly ENAER not specifically mentioned (2.5), (3.1.3), (3.1.4), in relation to this supplier (3.2.1)

3.3 ANALYSIS OF THE HYPOTHESES AND RESEARCH QUESTIONS

The present section has the objective of using the information gathered throughout this work, and described in the present chapter, together with the theory developed along the previous one, in order to try to reach conclusions about the research hypotheses and questions laid out in section 2.7.

In line with the post-positivist paradigm which serves as framework for the present research, the triangulation of information coming from several sources is of the utmost importance to try to achieve the best possible quality of conclusions (Guba & Lincoln, 1995). For this reason in each hypothesis or question the information obtained from the available sources will be compared and discussed; this is done in the paragraphs below, with the first subsection being devoted to the research hypotheses and the second one to the research questions.

3.3.1 Research Hypotheses

This subsection contemplates a discussion and analysis of each hypothesis pair stated in the previous chapter. For each one an outline of the relevant data from as many sources as available is

65 carried out, together with a discussion of that data and a conclusion regarding the validity of either the alternative or the null hypothesis.

3.3.1.1 – Supplier involvement and low time-to-market

The first hypothesis pair, coded as H 1, regards a relationship between supplier involvement and time to market in the development process of the Eclipse 500 VLJ. Recalling the previous chapter, the alternative hypothesis was phrased as:

H1,A : Supplier involvement has had a negative relationship with time-to-market in the Eclipse 500 development project.

It should be left well clear that by negative relationship it is not meant that supplier involvement has hurt the development project but that it has reduced time-to-market, being advantageous to Eclipse Aviation.

Firstly the data about this topic that can be gathered from the replies to the questionnaires is to be analysed. Using the question referencing code defined above, the main relevant questions for this hypothesis-pair are I.A.4 and I.B.4. Questions I.B.1, I.B.2 may also be of importance, because they may invalidate results of the other ones.

In order for the answers to questions about supplier involvement to have soundness it is absolutely necessary that supplier involvement has been present at the development of the product or assembly that the remaining questions refer to. The answers to I.B.2 are then crucial to enable a critical look to be had at the other questions.

The queried employees identified high levels of supplier involvement (4 and above) in all the assemblies addressed by the questionnaire, except for the cooperation with ENAER for the development of the nose assembly. Consequently the answers to the remaining relevant questions concerning the nose assembly should be analysed differently from the ones concerning the other assemblies, taking this fact into account.

The answers to I.B.1 tell that in these respondents’ opinions the time savings were never the most important reason in the choice of a supplier (as no respondent has chosen the answer of time savings). However this does not imply that the alternative hypothesis is not valid. The reason to analyse the answers to this question lied in the fact that had the respondents answered with “time savings” as the most important reason to choose the suppliers it would be likely that the alternative hypothesis was valid.

Regarding the development process as a whole, four out of the five interviewees claim (in question I.A.4) that cooperation with suppliers was either very relevant or exceptionally relevant (respectively 4 and 5 in the scale) in reducing the time-to-market of the Eclipse 500, with the other respondent considering it somewhat important. Furthermore, one of the further remarks done by respondents

66 states that “overall, early supplier involvement not only in the development but also the design of an aircraft has a very positive impact on both time and cost”.

The answers to I.A.4, together with this further remark, point towards a validation of the alternative hypothesis.

A similar question was asked but now reporting to each of the four featured assemblies separately (I.B.4). Regarding the Avio NG suite both respondents considered supplier involvement as very important in reducing time to market, and concerning the landing gear and the engines, both respondents considered it exceptionally important. The scores for the nose assembly were lower (relatively and not important, respectively levels of 1 and 2).

The scores obtained in these questions also largely point to the validation of the alternative hypothesis. The lower values obtained in the nose assembly are explained by the low levels of supplier involvement in the development of this assembly already pointed out by question I.B.2.

Relevant information about time-to-market is also featured in the additional remarks given by two respondents. Speaking about the cooperation with Ducommun in the procurement and development of the cockpit and fuselage skin panels these respondents claim that time savings were high with this particular supplier.

Further learning about each assembly made possible by the press releases is also of importance in assessing the contribution of the answers to the questionnaires shown above. The development of the Avio NG has involved cooperation with at least five different suppliers (identified in Table 3.2), while Eclipse Aviation served as the integrator of the several contributions. The time saving potential of this integration is very large, as the development of each component will take place in parallel. Besides, the components that constitute this integrated package are very different in themselves, and consequently their development needs to draw knowledge from many different areas. The involvement of suppliers has the potential to yield lower development time than if every solution had to be developed sequentially and by Eclipse Aviation.

No specific relevant information that may connect involvement of the landing gear, engines and nose assembly suppliers to reductions in time to market was found in the analysed press releases. The fact that the contracted suppliers are companies with a very large experience base in their specific areas may hint towards a quicker development than if they had been start-ups. The recognition of extraordinary performance done by Eclipse Aviation to Pratt & Whitney may or may not have to do with development time savings, but there is insufficient information to reach a definite conclusion.

The above performed analysis, triangulating information from the questionnaires with public information gathered mostly from the press releases, points towards the validation of the alternative hypothesis, claiming that supplier involvement was one of the factors contributing to the reduction of the time-to-market of the Eclipse 500 VLJ, by saving development time. The analysis of the connection between supplier involvement and development cost reductions now follows.

67 3.3.1.2 – Supplier involvement and development cost reductions

Before starting the analysis of the relationship between supplier involvement and development cost reductions the alternative hypothesis that this analysis aims to assess is restated:

H2,A : Supplier involvement has had a positive relationship with the development cost savings in the Eclipse 500 project.

In this statement, by a positive relationship it is meant that supplier involvement made possible the achievement of lower development costs than it would have been possible without the cooperation. The data coming from the questionnaires will be firstly analysed with the data from the public sources of information being looked at subsequently.

The most relevant question concerning this topic among the questionnaires is I.B.5, that asks specifically about the relationship between supplier involvement and development cost reductions for each of the concerned assemblies. In a similar fashion to the hypothesis pair discussed above, questions I.B.1 and I.B.2 are also relevant as they may compromise or have to be taken into account in the analysis of I.B.5.

The analysis of I.B.2 that is of interest to the discussion of this hypotheses-pair is similar to the one performed above when looking at the relationship between supplier involvement and development time savings. Consequently it is not going to be reproduced here. The main conclusions from such analysis are that in the opinion of the respondents the degree of cooperation with these suppliers was either high or very high for every assembly addressed in the study with the exception of the nose assembly, produced by ENAER.

Taking into account the answers given to I.B.1, only with ENAER and the nose assembly was low cost the prime factor in the selection of the supplier. In the other suppliers, low cost was never mentioned as the most important factor (with the exception of the case of the respondent that selected multiple answers to this question, where no interpretation is possible).

These answers do not mean that cost savings were not attained with the remaining suppliers. However they allow us to state with some degree of certainty that cost savings occurred due to the choice ENAER. However, if one looks carefully at this answer together with the fact that involvement with ENAER was low (from question I.B.1) it is not straightforward to conclude that cooperation with this supplier was the cause for the reduced costs. One can compare this situation with that of many first world companies that in the attempt to reduce costs have products manufactured in a build-to- print basis in countries where labour is cheaper. The answers to I.B.5 are expected to help clarify this situation.

In question I.B.5, concerning the Avio NG suite, the landing gear and the engines, one respondent selected high cost savings (60% to 80% of the total cost of the product) while the other ones selected very high cost savings (80% to 99% of the total cost of the product). In what concerns the nose

68 assembly, both respondents selected much lower values, with one selecting 0 to 20% and the other one 20% to 40%.

These results are in line with what was said in the previous paragraph, since the choice of ENAER for its low costs did not mean that supplier involvement had been a driver for reducing the costs of this component to Eclipse Aviation. In the other assemblies though, that sport much higher levels of cooperation with suppliers, cost savings were mostly very high. This information leads in the direction of the confirmation of the aforementioned alternative hypothesis connecting cooperation with suppliers to development cost reductions.

Furthermore, in the further remarks section of the first questionnaire, Ducommun was referred by the leading role employee and the specialised employee in the area of the nose assembly as a supplier with which cost savings were high. The specialised employee in the area of the engines mentioned that “if the supplier is negligent or limited in their resources the cost to Eclipse mounts dramatically”. This respondent also states in the same section that “building trusting relationships with the suppliers is critical in the achievement of our mutual goals”.

In the press releases not much information concerning cost reductions is available. This is not unexpected since, by being aimed specifically at the press and generally at the public, Eclipse Aviation prefers to speak about its groundbreaking prices rather than the ways in which it achieved cost savings. One indirect mention was made to achieving cost savings with the suppliers: the company, speaking about the addition of Ducommun and ENAER to the group of suppliers, speaks of its suppliers as a whole as sharing “Eclipse's vision for expanding the market for private jet aviation by dramatically changing the economics of private jet travel” (Eclipse Aviation, 2004c).

The analysis of the relevant questions in the questionnaires as well as the one of the press releases points towards a connection between cooperation with suppliers and development cost reductions in this specific case of the development of the Eclipse 500 VLJ. The alternative hypothesis is then validated by the information gathered in this thesis. The assessment of the pair of hypothesis concerning supplier specific investments and level of supplier involvement is done in the next paragraphs.

3.3.1.3 – Supplier specific investments and level of supplier involvement

In the same fashion of the hypotheses tested above, this analysis starts with a restatement of the alternative hypothesis, corresponding to the prediction of what the researcher expects to happen. This hypothesis was phrased in subsection 2.7.1 of the second chapter as:

H3,A : Supplier specific investment has had a positive relationship with the level of supplier involvement in the Eclipse 500 development project.

69 Before proceeding to look at whether or not the press releases are able to provide information about such a specific topic the analysis of the relevant questions in the questionnaires is carried out.

It was mentioned above that the second questionnaire contemplated information that was more closely related to the analysis of the two last pairs of hypotheses. In fact, with the exception of question I.B.2, no question of the first questionnaire is relevant for the assessment of this prediction. In the second questionnaire, questions II.A.2, II.B.4 and II.B.5 are significant for this hypothesis-pair.

The results of question I.B.2 have yielded that cooperation was either high or very high in all of the assemblies featured in the questionnaires, with the exception of the nose assembly. Similarly to the two analyses performed above the answers given regarding specifically this assembly have to be looked at not disregarding this low level of involvement.

Question II.A.2 concerned to which extent the respondents considered the suppliers were making specific investments in the relationship with Eclipse Aviation. All the interviewees considered that regarding the development process as a whole the suppliers have been making extensive investments in the relationship with Eclipse Aviation (comparable to building specific production lines). One exception occurred to this general answer, as one respondent considered that only large specific investments have been made by the suppliers such as specific worker training.

II.B.4 was similar to II.A.2, but now concerning each of the featured assemblies separately. The specialised employee in the area of the Avio NG suite answered that large specific investments had been made by the suppliers; all the other respondents answered that extensive specific investments had been made by the suppliers in the relationship with Eclipse Aviation. The fact that the answers to II.B.4 and II.A.2 are so similar provides some degree of confidence in the fact that the selected group of assemblies is representative of the reality going on in the rest of the development project.

Regarding the Avio NG avionics suite, one respondent considered the specific investments very important in contributing to higher levels of involvement, while the other one considered them exceptionally important. All respondents in the landing gear and engine assemblies considered the specific investments as very important in achieving higher levels of supplier involvement. Finally, regarding the nose assembly, one respondent answered that the specific investments were only somewhat important contributors to higher levels of involvement while the other one considered them as exceptionally important.

By joining together the low levels of involvement hinted by the answers to I.B.2 with ENAER, together with the contradictory answers to II.B.5 regarding that specific supplier, it was decided to withdraw the nose assembly from the information sources for the assessment of this specific pair of hypotheses.

The answers concerning the other three assemblies point specifically towards a positive relationship between supplier specific investments and level of supplier involvement, as predicted by the alternative hypothesis.

70 In the press releases no information was found that was relevant to the assessment of this pair of hypotheses. This may be due to the fact that this prediction concerns a very technical aspect in the area of supply chain management and is not of interest at all to any of the expected readers of the press releases. The decision of whether to validate or refute this alternative hypothesis is to be done solely on the basis of the information gathered from the questionnaires.

Based on the answers to the three assemblies contemplated in the questionnaires (as one of them was withdrawn due to the suspicious combined results of I.A.2 and II.B.5), combined with the equally positive answers given regarding the development process as a whole (II.A.2) it was decided to validate the alternative hypothesis, stating that supplier specific investments have led to higher levels of supplier involvement in the development process of the Eclipse 500. The final pair of hypotheses to be assessed concerns qualification of supplier abilities and level of supplier involvement, and this assessment is done below.

3.3.1.4 – Qualification of supplier abilities and level of supplier involvement

The alternative hypothesis concerning this pair of hypothesis predicts a positive connection between high level of qualification of supplier abilities by Eclipse Aviation and the level of involvement with that supplier. It was phrased in the previous chapter as:

H4,A : Supplier qualification has had a positive relationship with the level of supplier involvement in the Eclipse 500 development program.

The most significant questions for the assessment of this prediction are II.A.1, II.B.1 and II.B.3. Similarly to all the cases above, question I.B.2 is important in helping to validate the answers obtained to the other relevant questions. The discussion of I.B.2 was already done above, concluding that supplier involvement was generally very high in all the featured assemblies except for the nose assembly.

Question II.A.1 is also important for the validation of the answers to subsequent questions, as it asks, regarding the whole development process, to which extent has Eclipse Aviation been making efforts to qualify its suppliers before selecting them. The efforts are generally high in the opinion of the respondents, as a half of them selected formal quantitative qualification (such as attributing a single score to each possible supplier) and the other half selected the most complex form of qualification possible (one equivalent to attributing several scores to each supplier to account for their performance in different areas).

Question II.B.1 is a particularisation of the general question II.A.1 now separately targeting the efforts to qualify the suppliers of each of the featured assemblies. Results were also very high, with every respondent choosing the highest possible level of effort for each supplier, with the exception of the specialised employee in the area of the nose assembly that selected the second highest possible value. The answers to this question are generally in accordance to the ones given for the

71 development process as a whole, hinting that these assemblies are representative of the development process in what concerns supplier qualification.

Question II.B.3 asked about to which extent the efforts to qualify the suppliers contributed to higher levels of supplier involvement. Results were generally very high, with all respondents but the specialised employee in the area of the nose assembly selecting the highest possible choice. This particular specialised employee selected a rather moderate value (level 3 out of possible 5).

This effect is similar to the one found in the analysis of the previous pair of hypotheses, where this contradiction between values of the two employees that answered about ENAER together with the low level of involvement of this supplier stated in I.B.2 leads to the exclusion of the nose assembly from this analysis.

Once again no useful information for the assessment of this pair of hypotheses was found in the press releases. This may be due to similar reasons as the ones that led to no information being found about supplier specific investments. These matters are very technical and specific to the area of supply chain management, and have no room to be published in press releases that aim to inform the public about developments of the Eclipse 500 VLJ.

The available information points towards the validation of the alternative hypothesis, stating that the efforts to qualify the suppliers led to higher levels of supplier involvement in the development of the Eclipse 500 VLJ.

The confirmation of the fourth alternative hypotheses ends the assessment of the pairs of hypotheses. The remainder of this chapter is devoted to the analysis and answering of the research question of this thesis.

3.3.2 Research Questions

The decision to use a research question in parallel to testing of hypotheses was explained in the previous chapter. Research questions give the researcher more flexibility to encompass unexpected results and possible theories (Eisenhardt & Graebner, 2007) that may result from the careful study of a particular case.

3.3.2.1 – Other outcomes from supplier involvement

This research question was introduced in the second chapter and was phrased as follows:

Q1: Which other outcomes and results of early supplier involvement in the Eclipse 500 development program were there detected other than the ones predicted by the hypotheses?

72 The answer to a research question is broader and with more space for induction than the testing of hypotheses done earlier in this chapter.

The first issue that is to be analysed is the relationship between supplier involvement and the quality or performance of the supplied goods. This topic was not chosen as a hypothesis as the quality or performance improvements would be much more difficult to quantify than for instance the development time savings or cost reductions.

The relevant questions in the questionnaires regarding quality and supplier involvement are I.B.1, I.B.3 and II.B.2, with I.B.2 playing the same validation role as it did in the hypothesis testing.

The answers to I.B.2 have been analysed before and lead to the conclusion that supplier involvement was much lower in the development of the nose assembly than it was in the other three assemblies. Thus the answers to I.B.1, I.B.3 and II.B.2, that concern the influence of supplier involvement on another variable, have to be interpreted differently taking into account the assembly they refer to, as they were when testing the hypotheses.

Regarding the Avio NG suite and the Engines, both respondents signalled in I.B.1 that the superior performance of the products was the prime reason for the choice of the suppliers. In the landing gear other factors are mentioned (though one respondent chose the superior performance of the products among other answers) and in the nose assembly the superior performance of products was not mentioned at all by any respondent.

As for what concerns the perceived connection between cooperation with the suppliers and the achievement of the desired performance of each product (question I.B.3), every respondent considered that supplier involvement was exceptionally important in achieving the desired performance of the Avio NG suite, the landing gear and the engines. A lower importance was chosen for the nose assembly; that may be explained by the lower involvement of the suppliers in the development of the nose assembly.

Question II.B.2 targeted the connection between the efforts done by Eclipse Aviation to qualify its suppliers and the achievement of the desired quality standards in the goods bought from those suppliers. Similarly to question I.B.3 every respondent in the areas of the Avio NG suite, the landing gear and the engines chose the highest possible answer, meaning the largest possible importance.

In the press releases references exist hinting to the importance of partnering with suppliers to achieve higher end-product quality. This is evidenced by the following quote from the CEO of Eclipse Aviation about the suppliers of the Avio NG suite: “[The suppliers’] established track records and superior capabilities will allow us to provide our customers with the Avio we always promised. We are looking forward to a long and successful relationship with each company” (Eclipse Aviation, 2007f). Other references to the high quality products provided by the suppliers are made in the press releases (e.g. Eclipse Aviation, 2004a, 2004e, 2006c).

73 The results of I.B.1, showing that quality was one of the main reasons for choosing suppliers, does not imply that the achieved performance occurred as a result of supplier involvement. However, combining the results of I.B.1 with I.B.2 it is seen that in this particular set of cases, Eclipse Aviation was much more involved with the suppliers chosen for their quality than with the one chosen for other reasons.

The information gathered from the press releases on its own fails to give evidence that involvement with suppliers contributed to higher end-product quality. However combining that information with the very positive answers given to I.B.2 it can be said with reasonable certainty that in the analysed assemblies Eclipse Aviation’s cooperation with the suppliers contributed to achieve the desired quality standards.

A positive relationship between supplier qualification and meeting the required quality standards of the purchased goods appears to be an easy conclusion to draw from the very positive answers of the respondents to II.B.3. However there is not enough information to confirm if this conclusion is valid, or if the very positive answers were caused by a third-variable problem (Trochim, 2005). A third variable problem is a situation where an apparent correlation exists between two variables, but in fact the two variables are simply influenced by an unobserved third variable that accounts for their behaviour. This situation often leads to spurious assumptions about the direction of causal relationships. If the hypothesis that the efforts to qualify the suppliers were positively related to the level of involvement was validated and there is evidence that higher levels of involvement are related with higher product quality, this could explain the connection between the efforts to qualify the suppliers and the meeting of quality and performance goals.

Another issue that was featured in the questionnaires but not dealt with in the hypotheses is the possible relationship between the cooperation with the suppliers (and the use of their built brand names) and the high number of advance orders received by Eclipse Aviation for the Eclipse 500. Previous work based on public data only (mainly press releases and general website data) had pointed this out as a possible effect of supplier involvement in the development of this aeroplane (Boavida, 2008).

The answers given to this question (I.A.5) show that the respondents did not consider the cooperation with suppliers and use of their brand names very important in the attraction of a large number of orders (one respondent answered a level of 1, two answered with a level of 2 and other two with a level 3, while another one chose level 4). Though these answers seem to point to the fact that supplier involvement was not very important in gathering a large amount of advance orders this issue was not dealt with deep enough in this thesis to produce a conclusive result, and may be the subject of further research.

Summarising the discussion, an answer to the research question is proposed in the following paragraph:

74 Results of the questionnaires combined with the press releases suggest a positive relationship between cooperation with the suppliers and the achievement of desired quality goals. Furthermore, the gathered data also suggests that quality or performance of the supplied goods was the most common reason for choosing the suppliers of the featured assemblies, and a positive relationship between choosing a supplier for quality of the supplied goods and cooperation with that particular supplier is also suggested. In addition, a positive relationship was observed between efforts to qualify a supplier and achievement of quality or performance goals, but that conclusion may be flawed by a third variable problem. Finally, and contradicting previous research, the respondents consider that there is no strong positive relationship between cooperation with suppliers (and use of their brand names) and the reception of a large number of advance orders of the Eclipse 500.

In the present chapter, the results of the data gathering process were presented and analysed in order to test the hypotheses and address the research question posed in the previous chapter. The following and final chapter will summarise the research carried out in this thesis and present its conclusions.

75

Chapter 4 - DISCUSSION AND CONCLUSIONS

4.1 SUMMARY

This thesis presented a case study of supplier involvement in the development of a radical innovation by a new venture: the Eclipse 500 Very Light Jet, by Eclipse Aviation. More precisely, it assessed hypotheses concerning supplier involvement and time to market, development cost savings, suppliers’ specific investments and qualification of supplier abilities. A broader research question was also addressed, about the general outcomes of early supplier involvement in the product development process.

In order to position Eclipse Aviation and its product in the larger picture of air transport and understand its innovative qualities, the present work started by providing an overview of several particularities of the airline transport market, from the points of view of the operator and the passenger, and also of the existing on-demand alternatives. This led to a description of the Eclipse 500 VLJ, together with its philosophy of operation and the reasons for its innovativeness and interest to the study.

The literature review started by looking at several types of innovation described in existing work, leading to the construction of a summarised one-dimensional scale of innovation, with incremental and radical innovation on opposite ends. Perspectives of different authors on the relationship between radical innovation and new ventures were also reviewed, leading to the classification of the Eclipse 500 VLJ as a radical innovation carried out by a new venture. The subject of early supplier involvement was introduced through a framework specifying the general activities that take place in the manufacturers for it to be achieved. Finally, the available research about supplier involvement in radical innovation projects by new ventures was addressed.

The research methodology used is based on the analysis of mostly qualitative data obtained from both public sources of information, and two questionnaires answered by five employees of the Supply Chain Management area in Eclipse Aviation. The main source of public data was a set of selected press releases issued by the company, but information available on the corporate website and documentation given to customers was also considered.

76 4.2 MAIN RESULTS

Through the triangulation of the information obtained from the data sources mentioned above together with the use of the available theory it was possible to assess the validity of the hypotheses. The results of the testing of hypotheses are summarised below in Table 4.1. The four hypotheses formulated were confirmed by the analysis performed in this work.

Table 4.1 – Results of hypothesis-testing

Direction of Independent Dependent predicted Status variable variable relationship

Supplier Confirmed by the H Time to market Negative 1,A Involvement analysis

Supplier Development cost Confirmed by the H Positive 2,A Involvement savings analysis

Suppliers’ specific Supplier Confirmed by the H Positive 3,A investments Involvement analysis

Qualification of Supplier Confirmed by the H Positive 4,A supplier abilities Involvement analysis

The research question led to the raising of several more issues in the relationship between Eclipse Aviation and its suppliers in the development of the Eclipse 500. It was discovered that in this set of data Eclipse Aviation has been much more involved with the suppliers chosen for the quality of their products than with the other ones. Data also suggests that efforts to qualify suppliers may have contributed to the achievement of quality goals by Eclipse Aviation in the development of the Eclipse 500. It was also concluded that these respondents did not consider supplier involvement as a directly important factor in the achievement of the large number of advance orders that this aircraft has had.

4.3 DISCUSSION AND CONCLUSIONS

This section looks at the results from testing each hypothesis while confronting it with literature and grounded expectations of the author. A discussion about the quality of the results and conclusions, and of their limitations, ends this section.

The validation of the first alternative hypothesis implies that supplier involvement has led to a quicker time to market in the development of the Eclipse 500 VLJ. Parallel development is likely to have been one of the most important drivers of time savings obtained with the interaction with the suppliers. In fact, available literature states that time savings are one of the main reasons for manufacturers to engage in relationships with the suppliers early in the product development (e.g. Danilovic, 2006; Wagner & Hoegl, 2006; Weele, 2005; Wynstra et al., 2003). This conclusion also agrees with the one

77 obtained in previous research done specifically about the development of the Eclipse 500 by the author (Boavida, 2008) using a more limited set of data. No previous research exists about the relationship between early supplier involvement and development time savings in the specific case of radical innovations produced by new ventures.

The validation of the second alternative hypothesis confirms that supplier involvement has led to development cost savings in the development of the Eclipse 500 by Eclipse Aviation. Available literature also states that, besides time savings, cost savings are an important motivator for companies to get involved with their suppliers (e.g. Wagner & Hoegl, 2006; Weele, 2005; Wynstra et al., 2003). In what concerns supplier involvement in radical new product development by new ventures, one source (M. Song & Benedetto, 2008) states that supplier involvement gains importance in this type of companies due to the more limited set of financial resources generally available to new ventures.

The achieved conclusion for the case of the development of the Eclipse 500 VLJ is in line with what was expected taking into account the existing literature. However this work does not deeply assess how supplier involvement has contributed to reduce development costs. One possible confounding issue is that the aforementioned time savings obtained through supplier involvement may have led to cost savings (namely in salaries), creating a third variable, thus making it harder to assess causation.

The third alternative hypothesis concerned the existence of a positive relationship between specific investments carried out by the suppliers and the level of supplier involvement. This hypothesis was confirmed; this was expected, since Song & Benedetto’s (2008) work had performed an empirical study with new ventures performing radical innovations and confirmed it for their set of data. Specific investments done by suppliers represent a form of commitment to their customer; if the customer does well so will the supplier, and vice versa. Showing this commitment may also have the strategic effect of further strengthening the end product commercialised by the supplier, as an adaptation of the “burning the bridges” example of game theory (Smit & Trigeorgis, 2004). Furthermore, Song & Benedetto (2008) state that specific investments motivate the supplier to become more involved for financial reasons, as by definition specific investments are investments that are of reduced value outside the relationship they were made for.

The final hypothesis assessed in this study has shown that a positive relationship exists between qualification of supplier abilities and the level of supplier involvement in the development process of the Eclipse 500. As mentioned before, this hypothesis was similar to one laid out by Song & Benedetto (2008) and these authors have confirmed it for a broad sample of radical innovations conducted by new ventures. Since it has been shown that the Eclipse 500 may be seen as a radical innovation performed by a new venture it was not unexpected that this hypothesis would hold true for this product.

Systematic efforts to qualify suppliers before selecting them may lead to the choice of more adequate and better performing suppliers for the tasks Eclipse Aviation needs from them. Consequently it is

78 more likely that the manufacturer gets involved with such companies to strive for more advantages to result from the relationship. Besides, several sources mention that the building of a trusting relationship is an important factor for early supplier involvement (e.g. Weele, 2005). By further qualifying its suppliers the manufacturer gathers better information about them, rendering the building of a trusting relationship an easier and more natural task.

The analysis of the research question started by looking at the connection between supplier involvement and the achievement of the desired performance of the purchased goods. The analysis tells us the respondents feel that supplier involvement contributed to the achievement of the desired performances. The achievement of better performance through the leveraging of specific supplier expertise is one of the reasons for companies to strive for involvement with their suppliers (Danilovic, 2006; Wagner & Hoegl, 2006; Weele, 2005; Wynstra et al., 2003), and it has been seen that that is the case with Eclipse Aviation and the Eclipse 500. In what specifically concerns radical innovations and new ventures, Song & Benedetto (2008) found evidence of a connection between the level of supplier involvement and the performance of the new product.

Even though these sources relate supplier involvement to the performance of the new product and not of the supplied goods, the new product featuring the supplied goods cannot perform well if its subassemblies do not meet their goals. The available literature then supports the conclusion about a positive relationship between supplier involvement and performance of the supplied goods.

An apparently positive relationship was also observed between the efforts to qualify the suppliers and the performance of the supplied goods. Even though no literature about this topic was found, it is straightforward to find reasons that may explain this result. One of them is that by making further efforts to qualify the suppliers of a specific assembly or product Eclipse Aviation becomes better informed about such companies. It is then more likely that the supply chain management department will make a better and more informed decision, leading to better performance of the supplied goods. Furthermore, if the suppliers sense the efforts to qualify them done by Eclipse Aviation they may become more motivated to perform better, also leading to better performing supplied goods.

However the validity of this conclusion may be limited, as a third variable may affect causation. From the testing of the hypotheses it was concluded that a positive relationship exists between the qualification of supplier abilities and the level of involvement of that specific supplier with Eclipse Aviation. In the previous paragraphs it was also argued that in this set of data a positive relationship exists between the level of supplier involvement and the performance of the supplied goods. It is then clear that the level of supplier involvement may lead to a false conclusion about a relationship between the efforts to qualify the suppliers and the performance of the supplied goods. To see if this confounding issue is or not present a study with a larger set of data would be required, using statistical tools to precisely infer about the relationship between variables.

Finally, and contrarily to previous research done by the author (Boavida, 2008), it was found that the respondents did not consider that supplier involvement was important in attracting a large number of

79 advance orders for the Eclipse 500 VLJ. No literature was found addressing the relationship between early supplier involvement and the gathering of advance orders. This conclusion leads to believe that while the involvement of the suppliers was not directly a driver of advance orders, their presence must have been. Eclipse Aviation, as a very recent new venture at the time the orders started, and with no product to demonstrate since the first test aircraft only rolled out in 2004 (Eclipse Aviation, 2004f) is very likely to have made use of its suppliers’ built brand names to attract confidence (and consequently orders) around its product. It can then be said that possibly there is a positive relationship between the use of renowned suppliers and the number of advance orders in the development of the Eclipse 500 VLJ, but the available data in this thesis is not enough to confirm or deny its existence.

The final aspect to be addressed in this discussion section is the general validity of the research, and the factors that limited this validity. The most significant threat to conclusion validity is the aforementioned third variable problem in the conclusion about the relationship between efforts to qualify the suppliers and the performance of the supplied goods. As for internal validity, the triangulation of information from different sources was used to limit and counter the threats to this type of validity that would come from the usage of a single source of data. No threats to construct validity were identified, as the questionnaires featured direct questions addressing each construct, and they were used in the reasoning towards every conclusion drawn in this study. These threats would be much more likely to be present had indirect means of data collection been used.

The most limiting factor in what concerns the conclusion and internal validities of this study is the limited set of data available for the research. The geographic constraints, the lack of direct connections to the company and the limited amount of public information available on the company website led to the fact that it was not possible to gather as much specific and precise information as desirable. Even though the press releases were detailed and very important for the conclusions of this research and much information about the product was available on the corporate website, other data could have been useful. It was impracticable to conduct detailed interviews to the relevant employees due to the time constraints of the involved personnel from Eclipse Aviation. The questionnaires were the chosen way to address these problems, and since the replies depended on the good will of the addressed employees with whom no previous connection existed, it was decided to keep them very concise both in the number and depth of questions.

A better and more accurate analysis would have been possible with an on-site study of the complete list of suppliers of Eclipse Aviation for the Eclipse 500 VLJ. Furthermore, interviewing relevant employees from Eclipse and from the suppliers, and building longer and more detailed questionnaires that would be conducted in person would likely have increased the amount of information gathered, and therefore increased the validity of the conclusions drawn.

Finally, the present study does not have a high external validity. The concluded results are only valid to the specific studied reality of the development of the Eclipse 500 by Eclipse Aviation. It was clear

80 from the beginning that the choice to do a single case study left little room for external validity, so this limitation was expected.

Before presenting suggestions for further research, the implications of the low external validity for managerial practices must be addressed. The results described here hold true for the development process of the Eclipse 500 VLJ by Eclipse Aviation; it is likely that in other development projects in different companies (or even in Eclipse Aviation) they may not be the same. They are to be seen by managers as what they are: results from a single case study, looking at the particularities of a single case. The author expects that these readers see these conclusions as opportunities to reflect on their own managerial practices, contributing to the achievement of better decisions and improved performances.

4.4 FUTURE WORK

There are several possibilities of further work in the area of this thesis that are opened both by the conclusions and by the limitations of the present study. The list that follows below does not intend to be exhaustive and features only the suggestions considered most relevant by the author.

The suggestions for further research are:

• Obtain further data and produce a mathematical cost and developing time model for the developing process of the Eclipse 500, and then assess which costs and time were saved by involving with the suppliers and to which extent; • Analyse the reasons that led to the decision to buy directly, involve the suppliers or develop exclusively in house each component or assembly of the Eclipse 500; • Perform a multiple case study of the supply chain management of the Eclipse 500 with its closest adversaries (e.g. the Cessna Citation Mustang, the Honda Jet or the Diamond D-jet) to investigate whether the conclusions of this study still hold; • Investigate, either on Eclipse Aviation or in a larger base of companies, the hinted connection between the use of renowned suppliers and the gathering of advance orders.

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82 Eclipse Aviation. (2006b). Eclipse Announces Service Center Location in Southern California. Eclipse Aviation. (2006c). Eclipse Aviation and Iridium Announce Mobile Satellite Products and Services for Eclipse 500. Eclipse Aviation. (2006d). Eclipse Community Celebrates as Eclipse 500 Earns Full FAA Type Certification. Retrieved December 27, 2007, from http://www.eclipseaviation.com/index.php?option=com_newsroom&task=viewpr&id=1142&Ite mid=52 Eclipse Aviation. (2007a). Comparisons. Retrieved December 27, 2007, from http://www.eclipseaviation.com/compare/compare_economics.html Eclipse Aviation. (2007b). Eclipse 500 Compared to Other Aircraft. Retrieved 17th March 2007, from http://www.eclipseaviation.com/files/pdf/ComparedChart.pdf Eclipse Aviation. (2007c). Eclipse Aviation - Partners. Retrieved March 14, 2007, from http://www.eclipseaviation.com/about/partners/ Eclipse Aviation. (2007d). Eclipse Aviation Delivers Three Eclipse 500 VLJs to DayJet. Eclipse Aviation. (2007e). Eclipse Aviation Partners with Swift Engineering to Develop Eclipse Concept Jet. Retrieved 8 January 2008, from http://www.eclipseaviation.com/index.php?option=com_newsroom&task=viewpr&id=1283&Ite mid=52 Eclipse Aviation. (2007f). Eclipse Aviation Partners with World-Class Suppliers to Deliver Next- Generation Avio Total Aircraft Integration System. Retrieved 17th March 2007, from http://www.eclipseaviation.com/index.php?option=com_newsroom&task=viewpr&id=1215&Ite mid=52 Eclipse Aviation. (2007g). Eclipse Aviation Timeline. Retrieved 27th December 2007, from http://www.eclipseaviation.com/popup/timeline.php Eclipse Aviation. (2008a). Eclipse Aviation - Press Releases. Retrieved 04 April 2008, from http://www.eclipseaviation.com/news_events/press_releases/ Eclipse Aviation. (2008b). Eclipse Aviation Introduces Eclipse 400 Single-Engine Jet. Retrieved July 03 2008, from http://www.eclipseaviation.com/index.php?option=com_newsroom&task=viewpr&id=1378&Ite mid=52 Eisenhardt, K. M. (1989). Building Theories from Case Study Research. Academy of Management Review, 14 (4), 532-550. Eisenhardt, K. M. (1991). Better Stories and Better Constructs: The Case for Rigor and Comparative Logic. The Academy of Management Review, 16 (3), 620-627. Eisenhardt, K. M., & Graebner, M. E. (2007). Theory building from cases: Opportunities and Challenges. Academy of Management Journal, 50 (1), 25-32. Garcia, R., & Calantone, R. (2002). A critical look at technological innovation typology and innovariveness terminology: a literature review. Journal of Product Innovation Management, 19 , 110-132. Green, S., Gavin, M., & Aiman-Smith, L. (1995). Assessing a multidimensional measure of radical technological innovation. IEEE Trans Engineer Manage, 42 , 203-214. Guba, E. G., & Lincoln, Y. S. (1995). Competing Paradigms in Qualitative Research. In N. K. Denzin & Y. S. Lincoln (Eds.), Handbook of Qualitative Research . Thousand Oaks, CA: Sage Publications Inc. Henderson, R. M., & Clark, K. B. (1990). Architectural Innovation: The Reconfiguration of Existing Product Technologies and the Failure of Established firms. Administrative Science Quarterly, 35 , 9-30. Holloway, S. (2003). Straight and Level: Practical Airline Economics (2nd ed.): Ashgate Publishing. Ito, H., & Lee, D. (2005). Assessing the impact of the September 11 terrorist attacks on U.S. airline demand. Journal of Economics and Business, 57 (1), 75-95. Kleinschmidt, E. J., & Cooper, R. J. (1991). The impact of product innonvativeness on performance. Journal of Product Innovation Management, 8 (4), 240-251. Kotler, P. (2004). Analisi dei mercati e del comportamento d'acquisto delle organizzazioni. In Marketing Management . Milano: Pearson Education Italia. Leifer, R., Salomo, S., & Gemunden, H. G. (2007). Research on corporate radical innovation systems - A dynamic capabilities perspective: An introduction. Journal of Engineering and Technology Management, 24 , 1-10. Li, H. (2001). How does new venture strategy matter in the environment-performance relationship? Journal of High Technology Management Research, 12 , 183-204. Lodish, L., Morgan, H. L., & Kallianpur, A. (2001). Entrepreneurial Marketing . New York.

83 Martin, J. (1995). Ignore your customer. Fortune, 131 (8), 121-126. McDermott, C. M., & O'Connor, G. C. (2002). Managing radical innovation: an overview of emergent strategy issues. The Journal of Product Innovation Management, 19 , 424-438. Montgomery, D. C., & Runger, G. C. (2003). Applied statistics and probability for engineers (3rd ed.): John Wiley & Sons. NetJets Inc. (2007a). NetJets Fast Facts. Retrieved December 26, 2007, from http://www.netjets.com/Learn_More/pdfs/NetJets_Fast_Facts.pdf NetJets Inc. (2007b). NetJets History. Retrieved December 26, 2007, from http://www.netjets.com/about_netjets/history.asp NetJets Inc. (2007c). NetJets UK Press Pack 2007. Retrieved December 26, 2007, from http://www.netjetseurope.com/presscentre/english/default.asp O'Connor, G. C., & McDermott, C. M. (2004). The human side of radical innovation. Journal of Engineering and Technology Management, 11 (30). OurPLANE. (2007). OurPLANE - About Us. Retrieved 20th March 2007, from http://www.ourplane.com/nonpilot/index.asp Patton, M. Q. (2002). Qualitative Research & Evaluation Methods . Thousand Oaks, CA: Sage Publications, Inc. Pavitt, K. (2003). The Process of Innovation .Unpublished manuscript, Brighton. Petersen, K. J., Handfield, R. B., & Ragatz, G. L. (2005). Supplier integration into new product development: coordinating product, process and supply chain design. Journal of Operations Management, 23 , 371-388. Porter, M. E. (1985a). Competitive Strategy: The Core Concepts : The Free Press. Porter, M. E. (1985b). The Value Chain and Competitive Advantage. In Competitive Advantage, creating and sustaining superior performance : The Free Press. Rice, M., Liefer, R., & O'Connor, G. (2002). Assessing transition readiness for radical innovations. Research-Technology Management, 45 (6), 50-56. Scanlon, J., & Jana, R. (2007). The State of Innovation [Electronic Version]. BusinessWeek from http://www.businessweek.com/innovate/content/dec2007/id20071219_302022.htm . Schwandt, T. A. (1995). Constructivist, Inerpretivist Approaches to Human Inquiry. In N. K. Denzin & Y. S. Lincoln (Eds.), Handbook of Qualitative Research . Thousand Oaks, CA: Sage Publications Inc. Sheehan, J. J. (2003). Business and Corporate Aviation Management - On-demand Air Travel : McGraw Hill. Smit, H., & Trigeorgis, L. (2004). Strategic Investment: Real Options and Games : Princeton. Song, M., & Benedetto, C. A. D. (2008). Supplier's involvement and success of radical new product development in new ventures. Journal of Operations Management, 26 (1), 1-22. Song, X. M., & Montoya-Weiss, M. M. (1998). Critical Development Activities for Really New versus Incremental Products. Journal of Product Innovation Management, 15 , 124-135. Stake, R. (1995). The Art of Case Study Research . Thousand Oaks, CA: Sage Publications Inc. Stake, R. E. (1994). Case Studies. In N. K. Denzin & Y. S. Lincoln (Eds.), Handbook of Qualitative Research . Thousand Oaks, CA: Sage Publications. Trochim, W. (2005). Research Methods: The Concise Knowledge Base : Atomic Dog Publishing. Tsai, M.-T., & Li, Y.-H. (2007). Knowledge creation processes in new venture strategy and performance. Journal of Business Research, 60 , 371-381. Wagner, S. M., & Hoegl, M. (2006). Involving suppliers in product development: insights from R&D directors and project managers. Industrial Marketing Management, 35 , 936-943. Weele, A. J. v. (2005). Purchasing and Supply Chain Management: Analysis, Planning and Practice (4th revised ed.). London: Thomson Int. Williamson, O. E. (1975). The Economic Institutions of Capitalism . New York. Wynstra, F., Weggeman, M., & Weele, A. v. (2003). Exploring purchasing integration in product development. Industrial Marketing Management, 32 , 69-83. Yin, R. K. (1994). Case study research: Design and methods (2nd ed.). Newbury Park, CA: Sage Publications, Inc.

84

ANNEXES

85

86 Annex 1 - The First Questionnaire

Questionnaire about Suppliers

Thank you for taking your time to answer this questionnaire; it should take you no more than 5 to 10 minutes. It is split into a general information section (A), one about four specific components of the airplane (B) and a final section for you to add further remarks if you have any (C). Please feel free to skip answering sub-sections of B if you were not involved with that particular component. The results will be used for a Master’s thesis that focuses on a case study of Eclipse Aviation as an example of supplier cooperation in a radical innovation project by a new company. Feel free to sign it or not; if you do your privacy will certainly be respected. Please send it to me by e-mail ([email protected] ) or contact me to that address if you prefer that I call you and ask these questions on the phone.

Furthermore, if you are able to give me a contact in any of the suppliers below please add it in the remarks section as it would also be very useful for my research to have answers from the suppliers to some questions.

A. About You and Eclipse 1. What is your age group?

[_] 56 or [_] 26-35 [_] 36-45 [_] 46-55 [_] 18-25 more

2. For how long have you been working at Eclipse Aviation (in years)?

[_] 5 or [_] 2 [_] 3 [_] 4 [_] 1 or less more

3. In your opinion, how successful is the Eclipse 500 project turning out to be?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Not successful Relatively Somewhat Very Exceptionally successful

87 4. In your opinion, to which extent was cooperation with suppliers relevant in reducing the time to market of the Eclipse 500 VLJ?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Not relevant Relatively Somewhat Very Exceptionally relevant

5. In your opinion, to which extent was cooperation with suppliers (and the subsequent use of their brand names) important in gathering a large number of advance orders of the Eclipse 500 VLJ?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Not important Relatively Somewhat Very important Exceptionally important important important

B. About individual suppliers

Avio NG Avionics Suite

This section features some general questions about the suppliers Eclipse Aviation cooperated with when developing the Avio NG Avionics Suite. In this group we have identified Innovative Solutions & Support, Chelton Flight Systems, Garmin International and PS Engineering Inc .

1. Which of these factors played the most important role in the choice of these suppliers?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Renowned brand Superior Other issues name of Performance of Low cost Time savings Suppliers products

2. What was the degree of cooperation with the suppliers in this product? (1- Low cooperation (developed exclusively by Eclipse) to 5-very high cooperation (developed exclusively by the suppliers))

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Very High No Cooperation Cooperation (Developed Some High (Developed by Low Cooperation exclusively by Cooperation Cooperation the supplier to Eclipse) Eclipse’s specs)

88 3. To which extent do you consider cooperation with suppliers in this product important in achieving the desired performance and quality of the Avio NG Avionics Suite?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Not important Relatively Somewhat Very important Exceptionally important important important

4. To which extent do you consider that the involvement of suppliers saved time in comparison to the situation where Eclipse Aviation would have developed this product on its own?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Very low time Low time saving Medium time High timesaving Very high time saving (20-40% of total saving (60-80% of total saving (0-20% of total time for the (40-60% of total time for the (80-99% of total time for the product) time for the product) time for the product) product) product)

5. To which extent do you consider that the involvement of suppliers reduced the development costs in comparison to the situation where Eclipse Aviation would have developed this product on its own?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Very low cost Low cost saving Medium cost High cost saving Very high cost reduction (20-40% of total saving (60-80% of total saving (0-20% of total cost of the (40-60% of total cost of the (80-99% of total cost of the product) cost of the product) cost of the product) product) product)

Landing Gear Assembly

This section focuses on the cooperation with Mecaer in the development of the landing gear assembly used in the Eclipse 500.

1. Which of these factors played a prime role in the choice of this supplier?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Renowned Superior brand name of performance of Low cost Time savings Other issues supplier products

89 2. What was the degree of cooperation with the suppliers in this product?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Very High Cooperation No Cooperation (Developed Low Some High (Developed by the supplier to exclusively by Cooperation Cooperation Cooperation Eclipse) Eclipse’s specs)

3. To which extent do you consider cooperation with the supplier in this product important in achieving the desired performance and quality of the landing gear assembly?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Not important Relatively Somewhat Very important Exceptionally important important important

4. To which extent do you consider that the involvement of suppliers saved time in comparison to the situation where Eclipse Aviation would have developed this product on its own?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Very low time Low time Medium time High Very high time saving saving saving timesaving saving (0-20% of (20-40% of (40-60% of (60-80% of (80-99% of total time for total time for total time for total time for total time for the product) the product) the product) the product) the product)

5. To which extent do you consider that the involvement of suppliers reduced the development costs in comparison to the situation where Eclipse Aviation would have developed this product on its own?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Very low cost Low cost Medium cost High cost Very high cost reduction saving saving saving saving (0-20% of (20-40% of (40-60% of (60-80% of (80-99% of total cost of total cost of total cost of total cost of total cost of the product) the product) the product) the product) the product)

90 Engines

This section focuses on the cooperation with Pratt & Whitney in the development of the engines powering the Eclipse 500 VLJ.

1. Which of these factors played the most important role in the choice of this supplier?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Renowned Superior brand name of performance of Low cost Time savings Other issues supplier products

2. What was the degree of cooperation with the suppliers in this product?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Very High No Cooperation Cooperation (Developed by (Developed Low Some High exclusively by Cooperation Cooperation Cooperation the supplier to Eclipse’s Eclipse) specs)

3. To which extent do you consider cooperation with the supplier in this product important in achieving the desired performance and quality of the powerplants of the Eclipse 500 VLJ?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Not important Relatively Somewhat Very important Exceptionally important important important

4. To which extent do you consider that the involvement of suppliers saved time in comparison to the situation where Eclipse Aviation would have developed this product on its own?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Very low time Low time Medium time High Very high time saving saving saving timesaving saving (0-20% of (20-40% of (40-60% of (60-80% of (80-99% of total time for total time for total time for total time for total time for the product) the product) the product) the product) the product)

91 5. To which extent do you consider that the involvement of suppliers reduced the development costs in comparison to the situation where Eclipse Aviation would have developed this product on its own?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Very low cost Low cost Medium cost High cost Very high cost reduction saving saving saving saving (0-20% of (20-40% of (40-60% of (60-80% of (80-99% of total cost of total cost of total cost of total cost of total cost of the product) the product) the product) the product) the product)

Cockpit and fuselage skin panels

This section focuses on the cooperation with ENAER in the development of the cockpit and fuselage skin panels of the Eclipse 500 VLJ.

1. Which of these factors played the most important role in the choice of this supplier?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Renowned Superior brand name of performance of Low cost Time savings Other issues supplier products

2. What was the degree of cooperation with the suppliers achieved in this product?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Very High Cooperation No Cooperation (Developed by (Developed Low Some High the supplier to exclusively by Cooperation Cooperation Cooperation Eclipse) Eclipse’s specs)

3. To which extent do you consider cooperation with the supplier in this product important in achieving the desired final result of the cockpit and fuselage skin panels of the Eclipse 500 VLJ?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Not important Relatively Somewhat Very important Exceptionally important important important

92 4. To which extent do you consider that the involvement of suppliers saved time in comparison to the situation where Eclipse Aviation would have developed this product on its own?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Very low time Low time Medium time High Very high time saving saving saving timesaving saving (0-20% of (20-40% of (40-60% of (60-80% of (80-99% of total time for total time for total time for total time for total time for the product) the product) the product) the product) the product)

5. To which extent do you consider that the involvement of suppliers reduced the development costs in comparison to the situation where Eclipse Aviation would have developed this product on its own?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Very low cost Low cost Medium cost High cost Very high cost reduction saving saving saving saving (0-20% of (20-40% of (40-60% of (60-80% of (80-99% of total cost of total cost of total cost of total cost of total cost of the product) the product) the product) the product) the product)

C. Further Remarks Please feel free to add any further remarks of your personal experience with the cooperation with suppliers in the development of the Eclipse 500 VLJ, such as successful, unsuccessful or otherwise relevant aspects, specific factors that helped to reduce time or costs or any other subject you feel is relevant.

93

94 Annex 2 - The Second Questionnaire

Further Questionnaire about Suppliers

Firstly, thank you for replying to the previous questionnaire and for taking your time to answer this one; I have identified that I lacked some important information and thus I made this questionnaire to gather it. This form is shorter than the first one and should take you no more than 5 minutes. It is split into a general information section (A), one about four specific components of the airplane (B) and a final section for you to add further remarks if you have any (C). Please feel free to skip answering sub-sections of B if you were not involved with that particular component. The results will be used for a Master’s thesis that focuses on a case study of Eclipse Aviation as an example of supplier cooperation in a radical innovation project by a new company. Feel free to sign it or not; if you do your privacy will certainly be respected. Please send it to me by e-mail ([email protected] ) or contact me to that address if you prefer that I call you and ask these questions over the phone.

Furthermore, if you are able to give me a contact in any of the suppliers below please add it in the remarks section as it would also be very useful for my research to have answers from the suppliers to some questions.

A. General Questions 1. Has Eclipse Aviation in general been explicitly making efforts to qualify its suppliers before selecting them? (e.g. in terms of product quality, delivery capacity, technological compatibility)?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

No efforts Informal Formal Formal Structured qualification qualification qualification formal (qualitative) (quantitative) quantification (assessment of different capabilities in each possible supplier)

95 2. To which extent have (in your opinion) Eclipse Aviation’s suppliers been making specific investments in this relationship? (making investments specifically to meet Eclipse Aviation’s requirements and that are unlikely to be used for other customers?)

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

No Investments Few Investments Medium Large Extensive (e.g. minor investments investments investments specialised tools) (e.g. visiting (e.g. specific (e.g. building Eclipse to better worker training) specific understand the production lines) requirements)

B. About individual suppliers

Avio NG Avionics Suite

This section features some general questions about the suppliers Eclipse Aviation cooperated with when developing the Avio NG Avionics Suite. In this group we have identified Innovative Solutions & Support, Chelton Flight Systems, Garmin International and PS Engineering Inc .

1. Did Eclipse Aviation explicitly make efforts to qualify these suppliers before selecting them? (e.g. in terms of product quality, delivery capacity, technological compatibility)?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

No efforts Informal Formal Formal Structured qualification qualification qualification formal (qualitative) (quantitative) qualification (quantitative assessment of different capabilities in each possible supplier)

2. To which extent do you consider that, in case they existed, these efforts were important in reaching the required quality standards in the goods bought from the suppliers?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Not important Relatively Somewhat Very important Exceptionally important important important

96 3. To which extent do you consider that, in case they existed, these efforts contributed to higher levels of involvement with these suppliers?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Not important Relatively Somewhat Very important Exceptionally important important important

4. To which extent did (in your opinion) these suppliers make specific investments in this relationship? (investments specifically to meet Eclipse Aviation’s requirements and that are unlikely to be used for other customers?)

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

No Investments Few Investments Medium Large Extensive (e.g. minor investments investments investments specialised tools) (e.g. visiting (e.g. specific (e.g. building Eclipse to better worker training) specific understand its production lines) requirements)

5. To which extent do you consider that, in case they existed, these specific investments contributed to higher levels of involvement with these suppliers?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Not important Relatively Somewhat Very important Exceptionally important important important

Landing Gear Assembly

This section focuses on the cooperation with Mecaer in the development of the landing gear assembly used in the Eclipse 500.

1. Did Eclipse Aviation explicitly make efforts to qualify possible suppliers for these goods before selecting Mecaer? (e.g. in terms of product quality, delivery capacity, technological compatibility)?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

No efforts Informal Formal Formal Structured qualification qualification qualification formal (qualitative) (quantitative) qualification (quantitative assessment of different capabilities in each possible supplier)

97 2. To which extent do you consider that, in case they existed, these efforts were important in reaching the required quality standards in the goods bought from the suppliers?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Not important Relatively Somewhat Very important Exceptionally important important important

3. To which extent do you consider that, in case they existed, these efforts contributed to higher levels of involvement with these suppliers?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Not important Relatively Somewhat Very important Exceptionally important important important

4. To which extent did (in your opinion) these suppliers make specific investments in this relationship? (investments specifically to meet Eclipse Aviation’s requirements and that are unlikely to be used for other customers?)

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

No Investments Few Investments Medium Large Extensive (e.g. minor investments investments investments specialised tools) (e.g. visiting (e.g. specific (e.g. building Eclipse to better worker training) specific understand its production lines) requirements)

5. To which extent do you consider that, in case they existed, these specific investments contributed to higher levels of involvement with these suppliers?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Not important Relatively Somewhat Very important Exceptionally important important important

98 Engines

This section focuses on the cooperation with Pratt & Whitney in the development of the engines powering the Eclipse 500 VLJ.

1. Did Eclipse Aviation explicitly make efforts to qualify possible engine suppliers before selecting one? (e.g. in terms of product quality, delivery capacity, technological compatibility)?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

No efforts Informal Formal Formal Structured qualification qualification qualification formal (qualitative) (quantitative) qualification (quantitative assessment of different capabilities in each possible supplier)

2. To which extent do you consider that, in case they existed, these efforts were important in reaching the required quality standards in the goods bought from the supplier?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Not important Relatively Somewhat Very important Exceptionally important important important

3. To which extent do you consider that, in case they existed, these efforts contributed to higher levels of involvement with this supplier?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Not important Relatively Somewhat Very important Exceptionally important important important

4. To which extent did (in your opinion) this supplier make specific investments in this relationship? (investments specifically to meet Eclipse Aviation’s requirements and that are unlikely to be used for other customers?)

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

No Investments Few Investments Medium Large Extensive (e.g. minor investments investments investments specialised tools) (e.g. visiting (e.g. specific (e.g. building Eclipse to better worker training) specific understand its production lines) requirements)

5. To which extent do you consider that, in case they existed, these specific investments contributed to higher levels of involvement with this supplier?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Not important Relatively Somewhat Very important Exceptionally important important important

99

Cockpit and fuselage skin panels

This section focuses on the cooperation with ENAER in the development of the cockpit and fuselage skin panels of the Eclipse 500 VLJ.

1. Did Eclipse Aviation explicitly make efforts to qualify possible suppliers for these goods before selecting ENAER? (e.g. in terms of product quality, delivery capacity, technological compatibility)?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

No efforts Informal Formal Formal Structured qualification qualification qualification formal (qualitative) (quantitative) qualification (quantitative assessment of different capabilities in each possible supplier)

2. To which extent do you consider that, in case they existed, these efforts were important in reaching the required quality standards in the goods bought from the suppliers?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Not important Relatively Somewhat Very important Exceptionally important important important

3. To which extent do you consider that, in case they existed, these efforts contributed to higher levels of involvement with the chosen supplier?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Not important Relatively Somewhat Very important Exceptionally important important important

4. To which extent did (in your opinion) ENAER make specific investments in this relationship? (investments specifically to meet Eclipse Aviation’s requirements and that are unlikely to be used for other customers?)

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

No Investments Few Investments Medium Large Extensive (e.g. minor investments investments investments specialised tools) (e.g. visiting (e.g. specific (e.g. building Eclipse to better worker training) specific understand its production lines) requirements)

100 5. To which extent do you consider that, in case they existed, these specific investments contributed to higher levels of involvement with ENAER?

1 - [_] 2 - [_] 3 - [_] 4 - [_] 5 - [_]

Not important Relatively Somewhat Very important Exceptionally important important important

C. Further Remarks Please feel free to add any further remarks of your personal experience with the cooperation with suppliers in the development of the Eclipse 500 VLJ, such as successful, unsuccessful or otherwise relevant aspects, specific factors that helped to reduce time or costs or any other subject you feel is relevant.

101