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PurposeThe purpose of this paper is to investigate the role of cognitive proximity on supply chain collaboration and how it relates to radical and incremental innovation.Design/methodology/approachThe paper is based on quantitative approach to analyze the data of 218 firms in a developing and transition economy. The proposal model is tested with exploratory factor analysis (EFA), confirmatory factor analysis (CFA) and structural equation modeling (SEM).FindingsThe authors' findings show that cognitive proximity facilitates decision synchronization and incentive alignment in the supply chain. Furthermore, the authors' results indicate that information sharing and decision synchronization are determinants of radical innovation while incentive alignment is a determinant of incremental innovation.Research limitations/implicationsThis study was cross-sectional, so the authors could not consider the control variable such as sectors or firms' size. It is hard to control the specific features of cognitive proximity in one single industry when using cross-sectional data. In future investigations, it may be possible to use a different dimension of proximity to explain the implementation of collaboration for innovation.Originality/valueThis study attempted to explore the role of cognitive proximity on supply chain implementation process in the context of a transition economy. Moreover, the authors' findings provide the clearer understanding of the relationship between collaboration and innovation.