Managing Innovation Spillover in Outsourcing

Production and Operations Management 29(10) 2252-2267

49 Pages Posted: 8 Jun 2017 Last revised: 26 Apr 2022

See all articles by Bin Hu

Bin Hu

University of Texas at Dallas - Department of Information Systems & Operations Management

Yunke Mai

University of Kentucky - Gatton College of Business and Economics

Saša Pekeč

Fuqua School of Business, Duke University

Date Written: April 30, 2020

Abstract

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

Suggested Citation

Hu, Bin and Mai, Yunke and Pekeč, Saša, Managing Innovation Spillover in Outsourcing (April 30, 2020). Production and Operations Management 29(10) 2252-2267, Available at SSRN: https://ssrn.com/abstract=2982180 or http://dx.doi.org/10.2139/ssrn.2982180

Bin Hu (Contact Author)

University of Texas at Dallas - Department of Information Systems & Operations Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

Yunke Mai

University of Kentucky - Gatton College of Business and Economics ( email )

550 South Limestone
Lexington, KY 40506
United States

Saša Pekeč

Fuqua School of Business, Duke University ( email )

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