Offshoring innovation: An empirical investigation of dyadic complementarity within SMEs

Abstract

Despite scholarly agreement that complementary capabilities are essential to successful collaborations, little is known about how small and medium-sized enterprises (SMEs) manage collaborative innovation through offshoring. Besides, the innovation management literature remains generally silent about when supplier joint actions could work in enhancing offshoring innovation (OI) performance. The purpose of this study is twofold. First, we aim to delineate why supplier's asset specificity and goal compatibility predict supplier's complimentary capabilities in OI. Second, we empirically explore the role of supplier joint actions in enhancing OI performance. Based on data collected from 200 SMEs having active OI relationships spanning four developed European countries, our results propose that supplier's complementary capabilities mediate the relationship between critical relational antecedents (supplier's asset specificity and goal compatibility) and OI performance. It should be noted, however, that despite their incentivising power, supplier joint actions can be a "double-edged sword" in SMEs' OI relationships.

Offshore outsourcing of innovation by SMEs: a 4F perspective of governance

“…We chose the specific context of buyer-supplier relationships due to the fact that SMEs, given their resource limitations, tend to prefer non-equity relationships over captive relationships (Rodríguez and Nieto, 2016). Non-equity-based outsourcing relationships are better than equity-style arrangements (Khraishi et al , 2020) as they can better assist in the sharing of risks associated with innovations and allow to rapidly move into different markets, as well as technologies (Quinn, 2000). We have used a cross-sectional survey to collect data; this approach is in line with previous studies that share similar populations and contexts (van de Vrande et al , 2009).…”

“…Extant literature posits that rewarding suppliers for improved performance will likely have a conducive effect on the suppliers' efforts and behaviour towards the buyers' interests (Shepherd and DeTienne, 2005). In OOI, such rewards can include the SME-supplier joint activities aimed at supplier development such as working in conjunction with the supplier to improve its cost efficiencies and quality (Khraishi et al, 2020). Specifically, SMEs' focused efforts to improve the offshore supplier profit and performance in the OOI relationship can be more effective given the difficulty of performance measurement and the uncertainty of OOI outcomes (Felin and Zenger, 2014).…”

“…Specifically, supplier joint actions are likely to add higher value to the alignment and effectiveness of governance mechanisms in OOI relationships (Kim et al , 2015). Offshore suppliers perceive such actions as strong indications of the buyer SMEs’ willingness to “give and take” and their consideration of the suppliers’ interests (Khraishi et al , 2020).…”

“…Firms of all sizes are increasingly engaging in outsourcing relationships as a means to attain competitive advantage (Wiengarten et al , 2013; Haleem et al , 2018; Johnsen et al , 2019). Outsourcing relationships, in general, provide firms with access to suppliers’ know-how and help them tap into global markets of knowledge and talent that could potentially deliver competitive advantage (Johnsen et al , 2019; Khraishi et al , 2020). There has been a consistent positive trend towards firms’ adoption of offshore outsourcing innovation (OOI) strategies in the past two decades (Lewin et al , 2009; Haleem et al , 2018).…”

“…However, this positive trend has received more scholarly attention in the context of large-scale firms rather than small and medium enterprises (SMEs) (Gusenbauer et al , 2015). To the extent, recent studies emphasise the need to study SMEs’ innovation strategies that involve offshore suppliers within the innovation process (Khraishi et al , 2020); investigating the underlying relationships between SMEs and their offshore suppliers could open up new avenues of knowledge within OOI strategies (Di Gregorio et al , 2009; Khraishi et al , 2020). Against this backdrop, our study aspires to study OOI relationships within SMEs.…”