The Impact of Innovation Off-Shoring on Organizational Adaptability

35 Pages Posted: 16 Jan 2014

See all articles by Elisabeth Baier

Elisabeth Baier

Christian Rammer

ZEW – Leibniz Centre for European Economic Research - Industrial Economics and International Management Research

Torben Schubert

Fraunhofer Institut für Systemtechnik und Innovationsforschung

Date Written: December 15, 2013

Abstract

We analyze the effects of captive off-shoring of innovation activities on the firms’ ability to adapt their organizational processes and structures. Starting from 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 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.

Keywords: Internationalization, Off-Shoring, Innovation, R&D, Organizational Adaptation, Organizational Adaptability

JEL Classification: O32, M16, L23, L25

Suggested Citation

Baier, Elisabeth and Rammer, Christian and Schubert, Torben, The Impact of Innovation Off-Shoring on Organizational Adaptability (December 15, 2013). ZEW - Centre for European Economic Research Discussion Paper No. 13-109. Available at SSRN: https://ssrn.com/abstract=2376264 or http://dx.doi.org/10.2139/ssrn.2376264

Christian Rammer (Contact Author)

ZEW – Leibniz Centre for European Economic Research - Industrial Economics and International Management Research ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

Torben Schubert

Fraunhofer Institut für Systemtechnik und Innovationsforschung ( email )

Breslauer Str. 48
Karlsruhe, 76139
United States

No contact information is available for Elisabeth Baier

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