• organizational learning;
  • absorptive capacity;
  • exploitation;
  • exploration;
  • innovativeness;
  • supplier selection

Manufacturers increasingly rely on innovation from their suppliers to improve the cost, quality, and timeliness of their products. Manufacturing capabilities are enhanced by supplier innovativeness directly, because of the embedded nature of the supplied component, and indirectly, as the manufacturer learns from its suppliers. We use organizational learning theory to develop a conceptual model of learning factors that act as contingencies and magnify the effect of supplier innovativeness. First, we argue that a manufacturer's absorptive capacity, its ability to learn and use external knowledge, positively moderates the impact of supplier innovativeness on the manufacturer's performance. Second, we examine how different combinations of manufacturer–supplier learning styles lead to relatively more or less interorganizational learning, contingent upon whether the outsourcing is design versus manufacturing oriented. Our model can help managers consider knowledge transfer as part of their supplier selection criteria.