| This dissertation considers two important questions pertaining to the outsourcing of innovation. First, how is the innovation outsourcing decision different from more traditional sourcing decisions? Since Williamson (1991), there has been speculation that the innovation outsourcing decision is distinct from other governance decisions. This research examines learning as well as appropriability as determinants of the innovation outsourcing decision; both of these additional determinants are found to significantly impact the governance decision.;The second question is: What are the performance implications of outsourcing innovation activities? The outcomes of outsourcing innovation are not yet well understood. Here, it is found that firms governing appropriately (i.e., according to transaction cost predictions) are more innovative than firms governing inappropriately. However, appropriately governing firms also face higher total innovation costs, though the increase in costs is proportionately smaller than is the increase in innovativeness. Further, it is shown that firms which over-contract (i.e., outsource too great a portion of their innovation activities) face higher total innovation costs than firms which under-contract, but firms which over-contract tend to be more profitable. |
