IDEAS home Printed from https://ideas.repec.org/p/hhs/lucirc/2013_044.html
   My bibliography  Save this paper

The Impact of Innovation Off-shoring on Organizational Adaptability

Author

Listed:
  • Baier , Elisabeth

    (PTV Group AG, Germany)

  • Rammer , Christian

    (ZEW, Germany)

  • Schubert , Torben

    (CIRCLE, Lund University, Sweden and Fraunhofer Institute for Systems and Innovation Research, Germany)

Abstract

We analyze the effects of captive off-shoring of innovation activities on the firms’ ability to adapt its organizational structures. Basing our arguments on complexity theory, we use three consecutive waves of the German part of the Community Innovation Survey to test our hypotheses. We find an inverted u-shape of innovation off-shoring on the effectiveness of organizational adaptability, implying an optimal threshold value of innovation off-shoring. This value is 11% for the share of off-shored R&D, 15% for downstream innovation activities such as local market adaptation, and 34% for design activities. We also analyze several contingency variables. In particular we show that the costs of innovation off-shoring in terms of reduced organizational adaptability are exacerbated by a strong focus on R&D and a strong embeddedness in on-shore networks. Smaller firms find it easier to deal with the management complexity induced by geographical dispersion of innovation activities because of their greater flexibility.

Suggested Citation

  • Baier , Elisabeth & Rammer , Christian & Schubert , Torben, 2013. "The Impact of Innovation Off-shoring on Organizational Adaptability," Papers in Innovation Studies 2013/44, Lund University, CIRCLE - Centre for Innovation Research.
    • Handle: RePEc:hhs:lucirc:2013_044
    as

    Download full text from publisher

    File URL: http://wp.circle.lu.se/upload/CIRCLE/workingpapers/201344_Baier_et_al.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Birgit Aschhoff & Tobias Schmidt, 2008. "Empirical Evidence on the Success of R&D Cooperation—Happy Together?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 33(1), pages 41-62, August.
    2. Arie Y Lewin & Silvia Massini & Carine Peeters, 2009. "Why are companies offshoring innovation? The emerging global race for talent," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(8), pages 1406-1406, October.
    3. Lenn Gomes & Kannan Ramaswamy, 1999. "An Empirical Examination of the Form of the Relationship Between Multinationality and Performance," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 30(1), pages 173-187, March.
    4. Walter Kuemmerle, 1999. "The Drivers of Foreign Direct Investment into Research and Development: An Empirical Investigation," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 30(1), pages 1-24, March.
    5. Herstad, Sverre J. & Aslesen, Heidi Wiig & Ebersberger, Bernd, 2014. "On industrial knowledge bases, commercial opportunities and global innovation network linkages," Research Policy, Elsevier, vol. 43(3), pages 495-504.
    6. Christoph Grimpe & Ulrich Kaiser, 2010. "Balancing Internal and External Knowledge Acquisition: The Gains and Pains from R&D Outsourcing," Journal of Management Studies, Wiley Blackwell, vol. 47(8), pages 1483-1509, December.
    7. Kedia, Ben L. & Mukherjee, Debmalya, 2009. "Understanding offshoring: A research framework based on disintegration, location and externalization advantages," Journal of World Business, Elsevier, vol. 44(3), pages 250-261, July.
    8. Koen Frenken & Luigi Marengo & Marco Valente, 1999. "Interdependencies, nearly-decomposability and adaption," CEEL Working Papers 9903, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
    9. Henderson, Rebecca., 1994. "The evolution of integrative capability : innovation in cardiovascular drug discovery," Working papers 3711-94., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    10. G. M.P. Swann, 2009. "The Economics of Innovation," Books, Edward Elgar Publishing, number 13211.
    11. Sendil K. Ethiraj & Daniel Levinthal, 2004. "Modularity and Innovation in Complex Systems," Management Science, INFORMS, vol. 50(2), pages 159-173, February.
    12. Schmidt, Tobias & Rammer, Christian, 2007. "Non-technological and Technological Innovation: Strange Bedfellows?," ZEW Discussion Papers 07-052, ZEW - Leibniz Centre for European Economic Research.
    13. John W. Medcof, 2001. "Resource‐based strategy and managerial power in networks of internationally dispersed technology units," Strategic Management Journal, Wiley Blackwell, vol. 22(11), pages 999-1012, November.
    14. Marcela Miozzo & Damian Grimshaw (ed.), 2006. "Knowledge Intensive Business Services," Books, Edward Elgar Publishing, number 3726.
    15. Herbert A. Simon, 1996. "The Sciences of the Artificial, 3rd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262691914, April.
    16. Zoltan J. Acs & David B. Audretsch, 1989. "Patents' Innovative Activity," Eastern Economic Journal, Eastern Economic Association, vol. 15(4), pages 373-376, Oct-Dec.
    17. Lorena M. D'Agostino & Keld Laursen & Grazia D. Santangelo, 2013. "The impact of R&D offshoring on the home knowledge production of OECD investing regions," Journal of Economic Geography, Oxford University Press, vol. 13(1), pages 145-175, January.
    18. Peter Maskell & Torben Pedersen & Bent Petersen & Jens Dick-Nielsen, 2007. "Learning Paths to Offshore Outsourcing: From Cost Reduction to Knowledge Seeking," Industry and Innovation, Taylor & Francis Journals, vol. 14(3), pages 239-257.
    19. J. Michael Geringer & Paul W. Beamish & Richard C. Dacosta, 1989. "Diversification strategy and internationalization: Implications for mne performance," Strategic Management Journal, Wiley Blackwell, vol. 10(2), pages 109-119, March.
    20. Dunning, John H. & Lundan, Sarianna M., 1998. "The geographical sources of competitiveness of multinational enterprises: an econometric analysis," International Business Review, Elsevier, vol. 7(2), pages 115-133, April.
    21. Thomas Brenner, 1999. "Modelling Learning in Economics," Books, Edward Elgar Publishing, number 1815.
    22. Bruno Cassiman & Reinhilde Veugelers, 2002. "R&D Cooperation and Spillovers: Some Empirical Evidence from Belgium," American Economic Review, American Economic Association, vol. 92(4), pages 1169-1184, September.
    23. Masahiko Aoki, 2013. "Horizontal vs. Vertical Information Structure of the Firm," Chapters, in: Comparative Institutional Analysis, chapter 5, pages 57-58, Edward Elgar Publishing.
    24. Ceci, Federica & Prencipe, Andrea, 2013. "Does Distance Hinder Coordination? Identifying and Bridging Boundaries of Offshored Work," Journal of International Management, Elsevier, vol. 19(4), pages 324-332.
    25. Masaaki Kotabe & Ronaldo Parente & Janet Y Murray, 2007. "Antecedents and outcomes of modular production in the Brazilian automobile industry: a grounded theory approach," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(1), pages 84-106, January.
    26. Jan W. Rivkin & Nicolaj Siggelkow, 2007. "Patterned Interactions in Complex Systems: Implications for Exploration," Management Science, INFORMS, vol. 53(7), pages 1068-1085, July.
    27. Helfat, C.E. & Raubitschek, R.S., 2000. "Product Sequencing: Co-Evolution of Knowledge, Capabilities and Products," Papers 00-1, U.S. Department of Justice - Antitrust Division.
    28. repec:wsr:wpaper:y:2008:i:015 is not listed on IDEAS
    29. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 701-728.
    30. Patel, Pari & Vega, Modesto, 1999. "Patterns of internationalisation of corporate technology: location vs. home country advantages1," Research Policy, Elsevier, vol. 28(2-3), pages 145-155, March.
    31. Jianmin Tang & Henrique Do Livramento, 2010. "Offshoring And Productivity: A Micro‐Data Analysis," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(s1), pages 111-134, June.
    32. Zoltan J. Acs & David B. Audretsch, 1989. "Patents as a Measure of Innovative Activity," Kyklos, Wiley Blackwell, vol. 42(2), pages 171-180, August.
    33. Peter D. Ørberg Jensen & Torben Pedersen, 2011. "The Economic Geography of Offshoring: The Fit between Activities and Local Context," Journal of Management Studies, Wiley Blackwell, vol. 48(2), pages 352-372, March.
    34. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
    35. Ketokivi, Mikko & Ali-Yrkkö, Jyrki, 2007. "Determinants of Manufacturing-R&D Co-location," Discussion Papers 1082, The Research Institute of the Finnish Economy.
    36. repec:bla:jomstd:v:47:y:2010:i:s2:p:1417-1433 is not listed on IDEAS
    37. Boehe, Dirk Michael, 2007. "Product development in MNC subsidiaries: Local linkages and global interdependencies," Journal of International Management, Elsevier, vol. 13(4), pages 488-512, December.
    38. Runjuan Liu & Dorothee J Feils & Barry Scholnick, 2011. "Why are different services outsourced to different countries?," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 42(4), pages 558-571, May.
    39. Ikujiro Nonaka & Ryoko Toyama, 2005. "The theory of the knowledge-creating firm: subjectivity, objectivity and synthesis," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 14(3), pages 419-436, June.
    40. Yue Maggie Zhou, 2013. "Designing for Complexity: Using Divisions and Hierarchy to Manage Complex Tasks," Organization Science, INFORMS, vol. 24(2), pages 339-355, April.
    41. Dante Di Gregorio & Martina Musteen & Douglas E Thomas, 2009. "Offshore outsourcing as a source of international competitiveness for SMEs," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(6), pages 969-988, August.
    42. Paul Windrum & Andreas Reinstaller & Christopher Bull, 2009. "The outsourcing productivity paradox: total outsourcing, organisational innovation, and long run productivity growth," Journal of Evolutionary Economics, Springer, vol. 19(2), pages 197-229, April.
    43. repec:bla:kyklos:v:42:y:1989:i:2:p:171-80 is not listed on IDEAS
    44. Roza, Marja & Van den Bosch, Frans A.J. & Volberda, Henk W., 2011. "Offshoring strategy: Motives, functions, locations, and governance modes of small, medium-sized and large firms," International Business Review, Elsevier, vol. 20(3), pages 314-323, June.
    45. Grote, Michael H. & Täube, Florian A., 2007. "When outsourcing is not an option: International relocation of investment bank research -- Or isn't it?," Journal of International Management, Elsevier, vol. 13(1), pages 57-77, March.
    46. Gassmann, Oliver & von Zedtwitz, Maximilian, 1999. "New concepts and trends in international R&D organization," Research Policy, Elsevier, vol. 28(2-3), pages 231-250, March.
    47. Herbert A. Simon, 2002. "Near decomposability and the speed of evolution," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 11(3), pages 587-599, June.
    48. María Jesús Nieto & Alicia Rodríguez, 2011. "Offshoring of R&D: Looking abroad to improve innovation performance," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 42(3), pages 345-361, April.
    49. Carlo Gianelle & Giuseppe Tattara, 2009. "Manufacturing Abroad While Making Profits at Home: The Veneto Footwear clothing industry," Chapters, in: Mario Morroni (ed.), Corporate Governance, Organization and the Firm, chapter 10, Edward Elgar Publishing.
    50. Bardhan, Ashok Deo & Jaffee, Dwight M, 2005. "Innovation, R&D and Offshoring," Fisher Center for Real Estate & Urban Economics, Research Reports qt24d9s78v, Fisher Center for Real Estate & Urban Economics, UC Berkeley.
    51. Fred Gault (ed.), 2013. "Handbook of Innovation Indicators and Measurement," Books, Edward Elgar Publishing, number 14427.
    52. Ram Mudambi, 2008. "Location, control and innovation in knowledge-intensive industries," Journal of Economic Geography, Oxford University Press, vol. 8(5), pages 699-725, September.
    53. Keld Laursen & Francesca Masciarelli & Andrea Prencipe, 2012. "Regions Matter: How Localized Social Capital Affects Innovation and External Knowledge Acquisition," Organization Science, INFORMS, vol. 23(1), pages 177-193, February.
    54. Lampel, Joseph & Bhalla, Ajay, 2011. "Living with offshoring: The impact of offshoring on the evolution of organizational configurations," Journal of World Business, Elsevier, vol. 46(3), pages 346-358, July.
    55. Bernd Görzig & Andreas Stephan, 2002. "Outsourcing and Firm-level Performance," Discussion Papers of DIW Berlin 309, DIW Berlin, German Institute for Economic Research.
    56. Schmeisser, Bjoern, 2013. "A Systematic Review of Literature on Offshoring of Value Chain Activities," Journal of International Management, Elsevier, vol. 19(4), pages 390-406.
    57. Cusmano, Lucia & Mancusi, Maria Luisa & Morrison, Andrea, 2009. "Innovation and the geographical and organisational dimensions of outsourcing: Evidence from Italian firm-level data," Structural Change and Economic Dynamics, Elsevier, vol. 20(3), pages 183-195, September.
    58. David L. Levy, 2005. "Offshoring in the New Global Political Economy," Journal of Management Studies, Wiley Blackwell, vol. 42(3), pages 685-693, May.
    59. von Zedtwitz, Maximilian & Gassmann, Oliver, 2002. "Market versus technology drive in R&D internationalization: four different patterns of managing research and development," Research Policy, Elsevier, vol. 31(4), pages 569-588, May.
    60. repec:bla:jomstd:v:47:y:2010:i:s2:p:1483-1509 is not listed on IDEAS
    61. Heinz Hollenstein, 2009. "Characteristics of Foreign R&D Strategies of Swiss Firms: Implications for Policy," Chapters, in: Dominique Foray (ed.), The New Economics of Technology Policy, chapter 19, Edward Elgar Publishing.
    62. Farok J. Contractor & Vikas Kumar & Sumit K. Kundu & Torben Pedersen, 2010. "Reconceptualizing the Firm in a World of Outsourcing and Offshoring: The Organizational and Geographical Relocation of High‐Value Company Functions," Journal of Management Studies, Wiley Blackwell, vol. 47(8), pages 1417-1433, December.
    63. Bettina Peters & Christian Rammer, 2013. "Innovation panel surveys in Germany," Chapters, in: Fred Gault (ed.), Handbook of Innovation Indicators and Measurement, chapter 6, pages 135-177, Edward Elgar Publishing.
    64. Bruno Cassiman & Reinhilde Veugelers, 2006. "In Search of Complementarity in Innovation Strategy: Internal R& D and External Knowledge Acquisition," Management Science, INFORMS, vol. 52(1), pages 68-82, January.
    65. Matthew J. Robson & Constantine S. Katsikeas & Daniel C. Bello, 2008. "Drivers and Performance Outcomes of Trust in International Strategic Alliances: The Role of Organizational Complexity," Organization Science, INFORMS, vol. 19(4), pages 647-665, August.
    66. Wayne S. DeSarbo & C. Anthony Di Benedetto & Michael Song & Indrajit Sinha, 2005. "Revisiting the Miles and Snow strategic framework: uncovering interrelationships between strategic types, capabilities, environmental uncertainty, and firm performance," Strategic Management Journal, Wiley Blackwell, vol. 26(1), pages 47-74, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Castellani, Davide & Montresor, Sandro & Schubert, Torben & Vezzani, Antonio, 2017. "Multinationality, R&D and productivity: Evidence from the top R&D investors worldwide," International Business Review, Elsevier, vol. 26(3), pages 405-416.
    2. Francesco Di Comite & dArtis Kancs, 2015. "Macro-Economic Models for R&D and Innovation Policies," JRC Working Papers on Corporate R&D and Innovation 2015-03, Joint Research Centre.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Baier, Elisabeth & Rammer, Christian & Schubert, Torben, 2015. "The Impact of Captive Innovation Offshoring on the Effectiveness of Organizational Adaptation," Journal of International Management, Elsevier, vol. 21(2), pages 150-165.
    2. Niccolò Pisani & Joan Enric Ricart, 2016. "Offshoring of Services: A Review of the Literature and Organizing Framework," Management International Review, Springer, vol. 56(3), pages 385-424, June.
    3. Schubert, Torben & Baier, Elisabeth & Rammer, Christian, 2016. "Technological capabilities, technological dynamism and innovation offshoring," ZEW Discussion Papers 16-044, ZEW - Leibniz Centre for European Economic Research.
    4. Lorena D’Agostino, 2015. "The neglected effects of R&D captive offshoring in emerging countries on the creation of knowledge at home," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 42(1), pages 61-91, March.
    5. Marina Papanastassiou & Robert Pearce & Antonello Zanfei, 2020. "Changing perspectives on the internationalization of R&D and innovation by multinational enterprises: A review of the literature," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(4), pages 623-664, June.
    6. Schmeisser, Bjoern, 2013. "A Systematic Review of Literature on Offshoring of Value Chain Activities," Journal of International Management, Elsevier, vol. 19(4), pages 390-406.
    7. Niccolò Pisani & Joan Enric Ricart, 2018. "Offshoring Innovation to Emerging Countries: The Effects of IP Protection and Cultural Differences on Firms’ Decision to Augment Versus Exploit Home-Base-Knowledge," Management International Review, Springer, vol. 58(6), pages 871-909, December.
    8. Torben Schubert & Elisabeth Baier & Christian Rammer, 2018. "Firm capabilities, technological dynamism and the internationalisation of innovation: A behavioural approach," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(1), pages 70-95, January.
    9. Martinez-Noya, Andrea & Garcia-Canal, Esteban & Guillen, Mauro F., 2012. "International R&D service outsourcing by technology-intensive firms: Whether and where?," Journal of International Management, Elsevier, vol. 18(1), pages 18-37.
    10. Castellani, Davide & Montresor, Sandro & Schubert, Torben & Vezzani, Antonio, 2017. "Multinationality, R&D and productivity: Evidence from the top R&D investors worldwide," International Business Review, Elsevier, vol. 26(3), pages 405-416.
    11. Asimakopoulos, Grigorios & Revilla, Antonio & Rodríguez, Alicia, 2023. "International R&D sourcing, innovation and firm age: The advantage of ‘born-international sourcers’," Technovation, Elsevier, vol. 122(C).
    12. Nidthida Lin, 2020. "Designing Global Sourcing Strategy for Cost Savings and Innovation: A Configurational Approach," Management International Review, Springer, vol. 60(5), pages 723-753, October.
    13. Molintas, Dominique Trual, 2010. "Globalisation impact on Danish SME: Offshore Outsourcing & local competitiveness," MPRA Paper 96529, University Library of Munich, Germany.
    14. Rodgers, Peter & Khan, Zaheer & Tarba, Shlomo & Nurgabdeshov, Assylbek & Ahammad, Mohammad F., 2019. "Exploring the determinants of location choice decisions of offshored R&D projects," Journal of Business Research, Elsevier, vol. 103(C), pages 472-483.
    15. Martinez-Noya, Andrea & Narula, Rajneesh, 2018. "What more can we learn from R&D alliances? : A review and research agenda," MERIT Working Papers 2018-022, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    16. Francesco Di Comite & D'Artis Kancs & Wouter Torfs, 2015. "Macroeconomic Modelling of R&D and Innovation Policies," JRC Research Reports JRC89558, Joint Research Centre.
    17. Behrens, Vanessa & Berger, Marius & Hud, Martin & Hünermund, Paul & Iferd, Younes & Peters, Bettina & Rammer, Christian & Schubert, Torben, 2017. "Innovation activities of firms in Germany - Results of the German CIS 2012 and 2014: Background report on the surveys of the Mannheim Innovation Panel Conducted in the Years 2013 to 2016," ZEW Dokumentationen 17-04, ZEW - Leibniz Centre for European Economic Research.
    18. Steinberg, Philip J. & Procher, Vivien D. & Urbig, Diemo, 2017. "Too much or too little of R&D offshoring: The impact of captive offshoring and contract offshoring on innovation performance," Research Policy, Elsevier, vol. 46(10), pages 1810-1823.
    19. Manning, Stephan, 2013. "New Silicon Valleys or a new species? Commoditization of knowledge work and the rise of knowledge services clusters," Research Policy, Elsevier, vol. 42(2), pages 379-390.
    20. Yi-Ju Lo & Tung Hung, 2015. "Structure offshoring and returns on offshoring," Asia Pacific Journal of Management, Springer, vol. 32(2), pages 443-479, June.

    More about this item

    Keywords

    Internationalization; Off-Shoring; Innovation; R&D; Organizational Adaptation; Organizational Adaptability;
    All these keywords.

    JEL classification:

    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M16 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - International Business Administration
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:lucirc:2013_044. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Torben Schubert (email available below). General contact details of provider: https://edirc.repec.org/data/circlse.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.