Relational and Contractual Governance for Innovation

Abstract

While the early years of Information Technology (IT) and business process outsourcing (BPO) were mainly characterized by a quest for cost savings (Loh and Venkatraman 1992; Lacity and Hirschheim 1993) and a focus on core competences (Quinn and Hilmer 1994), evidence from 2000 onwards suggests that client firms have been seeking added value from outsourcing by accessing suppliers’ competences (e.g. Dyer and Nobeoka 2000; Quinn 2000; Whitley and Willcocks 2011). Mol (2005) argued that “firms are increasingly relying on partnering relationships with outside suppliers that can act as an effective substitute to the internal generation of knowledge and innovation”. Similarly, Linder et al. (2003) and Weeks and Feeny (2008) argued that client firms rely on external suppliers in the search for new ideas. Accepting that innovation is outsourced and offshored, Lewin et al. (2009) studied the determinants driving firms to offshore innovations only to conclude that firms have been entering a global race for talent in which solutions will be sought wherever skills are available. Such observations suggest that innovation may be considered as one of the possible outcomes of outsourcing engagements.