International R&D service outsourcing by technology-intensive firms: Whether and where?

Abstract

We combine the streams of literature on outsourcing and offshoring to investigate (1) whether choosing an R&D offshore outsourcing strategy by technological firms is advisable, and (2) where these firms are more likely to allocate these R&D services outsourcing agreements offshore, namely, in developed or developing economies. Using original survey data from European and U.S. firms in technology-intensive industries, we place especial emphasis on the fact that certain firm-specific capabilities, such as technological and international expertise, are required in order to outsource R&D overseas, especially when offshoring to developing economies, as transaction costs are still the main deterrent to outsource offshore to these regions. In addition, our results also show that in the specific case of R&D services outsourcing, knowledge-seeking objectives lead to outsource to developed economies.

Determinants of internal and external R&D offshoring: evidence from Spanish firms

“…As for the specific case of R&D offshoring, according to Martínez-Noya et al (2012), the determinants of international R&D outsourcing would be related to both the international experience of the company and its skills and technological resources. The firm's experience in international markets would reduce the costs of search and selection of suitable foreign suppliers.…”

Offshoring of Services: A Review of the Literature and Organizing Framework

“…Conversely, the RBV approach is presented as the most appropriate theoretical perspective for framing the relocation of knowledge-intensive services that are critical to a company's creation of value and require distinctive capabilities as well as resource complementarities for their successful execution. Following Kedia and Lahiri (2007), other scholars have adopted a comparable multitheoretical approach, combining TCE and RBV arguments in order to model OS relocations (Boehe 2010;Martínez-Noya et al 2012;Pereira and Anderson 2012;Roza et al 2011;Vivek et al 2009). …”

“…Empirical findings also confirm the role of competitors' actions in driving the decision to go offshore, as companies learn from and mimic rivals' moves, contributing to the emergence of OS-related clusters in selected offshore locations (Dossani and Kenney 2007;Gao et al 2010;Javalgi et al 2009;Manning et al 2010). Other studies focus on the search for new knowledge that can lead to improved innovation performance (Martínez-Noya et al 2012;Nieto and Rodríguez 2011). An extensive body of IB research demonstrates that path dependencies based on earlier experience and cumulative learning within host environments can drive internationalization strategies and lessen the liability of foreignness for firms operating across borders (Barkema et al 1996;Chang and Rosenzweig 2001;Johanson and Vahlne 1977;Zaheer 1995).…”

“…Published studies on OS confirm that companies adopt a progressive learning-by-doing approach rooted in uncertainty reduction for their OS ventures, gradually augmenting their exposure to OS investments by relocating more complex functions. Hence, experiential knowledge in OS practices is considered a relevant driver of OS implementations (Demirbag and Glaister 2010;Hätönen 2009;Hutzschenreuter et al 2011a, b;Lewin and Peeters 2006;Martínez-Noya et al 2012;Maskell et al 2007).…”

“…OS research documents how companies with thorough technological capabilities are more likely to relocate some knowledge-intensive service activities offshore (Martínez-Noya and García-Canal 2011;Martínez-Noya et al 2012). Greater technological capabilities allow these companies to select, negotiate, and monitor their counterparts (Mayer and Salomon 2006) in order to transfer the necessary expertise (Martínez-Noya et al 2012), and ultimately benefit from the offshore relocation of R&D activities (Martínez-Noya and García-Canal 2011).…”