Outsourcing and Innovation

The central topic in the present research is the relationship between outsourcing and innovation from the perspective of the firm. More specifically, the central question is to what extent outsourcing of manufacturing or Research and Development ‐RnD‐ influences the product innovation performance of organisations in the Dutch production industry. To answer this question, a theoretical framework is developed that is used to deduce hypotheses. These hypotheses are tested in ordinal regression models, with data obtained from managers who work in the Dutch production industry. The empirical evidence gathered from 112 firms indicates that offshoring manufacturing or RnD ‐as a way of outsourcing‐ has a positive effect on the innovativeness of Dutch production firms. In addition, for offshoring manufacturing this relationship was moderated by the ‘distance’ between the Netherlands and the country to which the activity was offshored. The positive effect of offshoring production can be explained by presuming that the offshored activities are simple of nature and only lead to a marginal loss in knowledge and that the gained slack resources are allocated to strengthen activities directed to innovation; the trade‐off favours innovation. For RnD activities, the gained access to a larger RnD capacity at lower cost can have inspired the positive relationship with product innovation performance. No significant effect was found for outsourcing in general. The data did not offer evidence for the assumption that the absence of a significant relationship between outsourcing and innovation was caused by a lack of absorptive capacity or dictated by the reason why the activity was sourced to an external party. A plausible explanation is that the relationship between outsourcing and innovation is highly contingent to the specific situation, distorting an unambiguous relationship. Another interesting result ‐but which is beyond the scope of the research question‐ is that the strategic intent to innovation is positively related to product innovation performance. The latter effect is quite strong and even makes the effect of absorptive capacity on product innovation performance obsolete. This finding suggests that absorptive capacity is influenced by the emphasis a firm puts on its innovation activities; it is dependent on the strategic intent to innovation. Given that some of the results are inconclusive, further research is recommended to create a more comprehensive understanding of the relationship between outsourcing and innovation.