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External R&D and product innovation: Is over-outsourcing an issue?

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  • Carboni, Oliviero A.
  • Medda, Giuseppe

Abstract

The acquisition of external R&D positively affects the creation of innovative products; however, as external R&D intensity and complexity increase, firms may face higher costs of coordination and control. Recent literature has found evidence of the R&D over-outsourcing problem analyzing single-country small samples of firms. Moreover, most research has overlooked the endogeneity problems that can arise with firms' decisions on R&D. We investigate the external R&D–product innovation association, controlling for different types of research sources in a large collection of firms in five European countries. We find that external R&D enhances innovation outcomes until a certain threshold; beyond this threshold, firms face over-outsourcing. Furthermore, R&D acquired from universities shows to be most effective in promoting product innovations, whereas R&D acquired from firms within the same group has a larger effect on the intensity of innovative product sales.

Suggested Citation

  • Carboni, Oliviero A. & Medda, Giuseppe, 2021. "External R&D and product innovation: Is over-outsourcing an issue?," Economic Modelling, Elsevier, vol. 103(C).
    • Handle: RePEc:eee:ecmode:v:103:y:2021:i:c:s0264999321001905
    DOI: 10.1016/j.econmod.2021.105601
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