Controversy in innovation outsourcing research: review, synthesis and future directions

Abstract

There is a growing stream of research into the outsourcing of innovation activities within the innovation, management, marketing and economics disciplines. Understandably, this coincides with the practice becoming more commonplace in industry. Here, we attempt to synthesize research surrounding the question of whether to outsource or internalize innovation activities and the performance implications of this decision. Support for both transaction cost and resource‐based arguments is examined, with both theory bases showing substantial attention from both case‐based and empirical research. As innovation outsourcing research has progressed, several controversies have emerged in the literature and remain unresolved. For instance, case‐based research provides evidence that outsourcing innovation activities can lead to faster product development and cost savings; yet, empirical research shows that outsourcing may lead to higher costs and slower new product development. Further, the role of technological uncertainty may have two distinct and conflicting impacts on the outsourcing decision that are not yet well understood. Thus, we present an integrated, timely review of innovation outsourcing research and identify several areas that necessitate future research projects.