Managing Innovation Spillover in Outsourcing
Production and Operations Management 29(10) 2252-2267
49 Pages Posted: 8 Jun 2017 Last revised: 26 Apr 2022
Date Written: April 30, 2020
When an innovator sources for an innovative product from a supplier who is also a competitor in the end market, the potential innovation spillover may be a serious concern. Will an innovation ever source from a competitor-supplier in the presence of innovation spillover? In this paper we attempt to answer this question with an emphasis on the ex-ante uncertain values of innovations, and distinguish between technical innovations which can only spill over through sourcing and non-technical innovations which can spill over through sourcing as well as in the market. We find that for both types, an innovator may strategically source from a competitor-supplier, albeit for polar-opposite motivations: for technical innovations it does so such that the latter would postpone launching the innovative product; and for non-technical innovations it does so such that the latter would immediately launch the innovative product alongside the innovator. These insights highlight the richness of and may inform sourcing decisions in the presence of innovation spillover.
Keywords: Incremental innovation, disruptive innovation, knowledge spillover, strategic sourcing, coopetition, supplier encroachment
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