Abstract
When outsourcing R&D services, despite the economic benefits client firms can obtain thanks to the supplier refining their capabilities by serving more clients in the industry, potential knowledge leakage conflicts arise for the client as a result of the supplier contracting with competitors. Taking a capability-based and learning approach we suggest that client’s commitment to the process of capability development coevolves with the commitment shown by the supplier by refraining from working also with client competitors. Specifically, we argue that sharing suppliers with competitors only boost the client's innovative performance when outsourcing standardized services. Using original survey data from 170 European and U.S. technology-intensive firms, we find that the provider supplying competitors negatively contributes to the client achieving its innovation objectives when outsourcing non-standardized R&D services. However, when outsourcing standardized services, having a shared supplier allows the client to benefit from the upgraded supplier's capabilities. These results get reinforced when outsourcing to providers located in non-OECD economies, contexts where appropriability concerns matter most.
Published Version
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