Managing Innovation Spillover in Outsourcing

Bin Hu, Yunke Mai, Saša Pekeč

Research output: Contribution to journalArticlepeer-review

48 Scopus citations

Abstract

When an innovator outsources the manufacturing of an innovative product to a contract manufacturer (CM) which is also a competitor in the end market, the potential innovation spillover may be a serious concern. We study an innovator’s outsourcing decision under spillover risks with an emphasis on the ex ante uncertain values of innovations, and distinguish between technical innovations which can only spill over through outsourcing and non-technical innovations which can also spill over in the market. We find that in both cases an innovator may strategically outsource to a competitor-CM, albeit for distinct motivations: for technical innovations, it is done so that the competitor-CM would yield market leadership to the innovator; and for non-technical innovations, it is done so that the competitor-CM would face innovation uncertainties alongside the innovator.

Original languageEnglish
Pages (from-to)2252-2267
Number of pages16
JournalProduction and Operations Management
Volume29
Issue number10
DOIs
StatePublished - Oct 1 2020

Bibliographical note

Publisher Copyright:
© 2020 Production and Operations Management Society

Keywords

  • co-opetition
  • knowledge spillover
  • strategic outsourcing
  • supplier encroachment

ASJC Scopus subject areas

  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering
  • Management of Technology and Innovation

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