Outsourcing of New Product Development activities: The case of an automaker

Abstract

In the context of global competition, companies are searching for strategies to stand out and gain competitive advantage. One of these strategies is the outsourcing of activities. Researches over the years have addressed the process of production outsourcing, but the outsourcing of New Product Development (NPD) activities is a relatively new phenomenon. This paper aims at analyzing this phenomenon in the Brazilian Volkswagen subsidiary in order to know the reasons why the company performs the outsourcing of activities regarding new product development. It also addresses the factors that affect the decisions of outsourcing. The analyses were conducted in the light of the Resource-based view and Transaction Costs. The results reveal two ways of outsourcing: engineering services and product development. The former occurs when the automaker is in charge of the equipment, risk and rework. The latter occurs when a set of tasks is subcontracted. Thus, the supplier is in charge of the equipment, financial and rework risks. The reasons for subcontracting are the lack of an important resource that the company does not have to complete the development internally and the lack of capability to perform certain activities, reduce costs and limit headcount.