The increasing competitive pressures and speed of R&D and product innovation is prompting many multinational enterprise customers to outsource their core activities to suppliers. Despite organizational challenges due to cultural and physical separation from their partners, these are now charged with supplier-driven innovation. This study looks at key drivers of supplier innovativeness, examines the role of cross-national differences in shaping supplier innovativeness and examines the impact of this dimension on relationship performance in international customer–supplier relationships. Our findings from a large-scale survey of Taiwanese electronics suppliers provide evidence of the contribution of antecedents such as customer orientation, customer control and technological uncertainty to the enhancement of supplier innovativeness. Innovativeness contributes to increased customer dependence and improves relationship performance. Differences in knowledge bases stemming from different institutions are also tested in this study; we find that knowledge distance may be detrimental to the innovativeness-performance link in international exchange relationships.