IDEAS home Printed from https://ideas.repec.org/a/bla/popmgt/v29y2020i10p2252-2267.html
   My bibliography  Save this article

Managing Innovation Spillover in Outsourcing

Author

Listed:
  • Bin Hu
  • Yunke Mai
  • Saša Pekeč

Abstract

When an innovator outsources the manufacturing of an innovative product to a contract manufacturer (CM) which is also a competitor in the end market, the potential innovation spillover may be a serious concern. We study an innovator’s outsourcing decision under spillover risks with an emphasis on the ex ante uncertain values of innovations, and distinguish between technical innovations which can only spill over through outsourcing and non‐technical innovations which can also spill over in the market. We find that in both cases an innovator may strategically outsource to a competitor‐CM, albeit for distinct motivations: for technical innovations, it is done so that the competitor‐CM would yield market leadership to the innovator; and for non‐technical innovations, it is done so that the competitor‐CM would face innovation uncertainties alongside the innovator.

Suggested Citation

  • Bin Hu & Yunke Mai & Saša Pekeč, 2020. "Managing Innovation Spillover in Outsourcing," Production and Operations Management, Production and Operations Management Society, vol. 29(10), pages 2252-2267, October.
    • Handle: RePEc:bla:popmgt:v:29:y:2020:i:10:p:2252-2267
    DOI: 10.1111/poms.13222
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/poms.13222
    Download Restriction: no
    File URL: https://libkey.io/10.1111/poms.13222?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Hamilton, Jonathan H. & Slutsky, Steven M., 1990. "Endogenous timing in duopoly games: Stackelberg or cournot equilibria," Games and Economic Behavior, Elsevier, vol. 2(1), pages 29-46, March.
    2. Anupam Agrawal & Youngsoo Kim & H. Dharma Kwon & Suresh Muthulingam, 2016. "Investment in Shared Suppliers: Effect of Learning, Spillover, and Competition," Production and Operations Management, Production and Operations Management Society, vol. 25(4), pages 736-750, April.
    3. Albert Y. Ha & Shilu Tong & Hongtao Zhang, 2011. "Sharing Demand Information in Competing Supply Chains with Production Diseconomies," Management Science, INFORMS, vol. 57(3), pages 566-581, March.
    4. Saloner, Garth, 1987. "Cournot duopoly with two production periods," Journal of Economic Theory, Elsevier, vol. 42(1), pages 183-187, June.
    5. Bin Hu & Ming Hu & Yi Yang, 2017. "Open or Closed? Technology Sharing, Supplier Investment, and Competition," Manufacturing & Service Operations Management, INFORMS, vol. 19(1), pages 132-149, February.
    6. Anyan Qi & Hyun-Soo Ahn & Amitabh Sinha, 2015. "Investing in a Shared Supplier in a Competitive Market: Stochastic Capacity Case," Production and Operations Management, Production and Operations Management Society, vol. 24(10), pages 1537-1551, October.
    7. Gonçalo Pacheco‐de‐Almeida & Peter B. Zemsky, 2012. "Some like it free: Innovators' Strategic use of Disclosure to slow down Competition," Strategic Management Journal, Wiley Blackwell, vol. 33(7), pages 773-793, July.
    8. Bin Hu & Ming Hu & Yi Yang, 2017. "Open or Closed? Technology Sharing, Supplier Investment, and Competition," Manufacturing & Service Operations Management, INFORMS, vol. 19(1), pages 132-149, February.
    9. Gonçalo Pacheco de Almeida & Peter Zemsky, 2012. "Some Like It Free: Innovators Strategic Use of Disclosure to Slow Down Competition," Post-Print hal-00854004, HAL.
    10. Lim, Wei Shi & Tan, Soo Jiuan, 2010. "Outsourcing suppliers as downstream competitors: Biting the hand that feeds," European Journal of Operational Research, Elsevier, vol. 203(2), pages 360-369, June.
    11. Giovanni Maggi, 1996. "Endogenous Leadership in a New Market," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 641-659, Winter.
    12. Gonçalo Pacheco-De-Almeida & Peter B. Zemsky, 2012. "Some like it free: Innovators' Strategic use of Disclosure to slow down Competition," Post-Print hal-00696877, HAL.
    13. Ehsan Bolandifar & Panos Kouvelis & Fuqiang Zhang, 2016. "Delegation vs. Control in Supply Chain Procurement under Competition," Production and Operations Management, Production and Operations Management Society, vol. 25(9), pages 1528-1541, September.
    14. Zhuoxin Li & Stephen M. Gilbert & Guoming Lai, 2015. "Supplier Encroachment as an Enhancement or a Hindrance to Nonlinear Pricing," Production and Operations Management, Production and Operations Management Society, vol. 24(1), pages 89-109, January.
    15. Niu, Baozhuang & Wang, Yulan & Guo, Pengfei, 2015. "Equilibrium pricing sequence in a co-opetitive supply chain with the ODM as a downstream rival of its OEM," Omega, Elsevier, vol. 57(PB), pages 249-270.
    16. Gérard P. Cachon, 2004. "The Allocation of Inventory Risk in a Supply Chain: Push, Pull, and Advance-Purchase Discount Contracts," Management Science, INFORMS, vol. 50(2), pages 222-238, February.
    17. Daniel Granot & Shuya Yin, 2008. "Competition and Cooperation in Decentralized Push and Pull Assembly Systems," Management Science, INFORMS, vol. 54(4), pages 733-747, April.
    18. Manu Goyal & Serguei Netessine, 2007. "Strategic Technology Choice and Capacity Investment Under Demand Uncertainty," Management Science, INFORMS, vol. 53(2), pages 192-207, February.
    19. Krishnan S. Anand & Karan Girotra, 2007. "The Strategic Perils of Delayed Differentiation," Management Science, INFORMS, vol. 53(5), pages 697-712, May.
    20. Pun, Hubert & Sebastian Heese, H., 2014. "Outsourcing to suppliers with unknown capabilities," European Journal of Operational Research, Elsevier, vol. 234(1), pages 108-118.
    21. Baozhuang Niu & Jiawei Li & Jie Zhang & Hsing Kenneth Cheng & Yinliang (Ricky) Tan, 2019. "Strategic Analysis of Dual Sourcing and Dual Channel with an Unreliable Alternative Supplier," Production and Operations Management, Production and Operations Management Society, vol. 28(3), pages 570-587, March.
    22. Anil Arya & Brian Mittendorf & David E. M. Sappington, 2007. "The Bright Side of Supplier Encroachment," Marketing Science, INFORMS, vol. 26(5), pages 651-659, 09-10.
    23. Ying‐Ju Chen & Yutian Chen, 2014. "Strategic outsourcing under technology spillovers," Naval Research Logistics (NRL), John Wiley & Sons, vol. 61(7), pages 501-514, October.
    24. Xiaole Wu & Fuqiang Zhang, 2014. "Home or Overseas? An Analysis of Sourcing Strategies Under Competition," Management Science, INFORMS, vol. 60(5), pages 1223-1240, May.
    25. Hau L. Lee & Christopher S. Tang, 1997. "Modelling the Costs and Benefits of Delayed Product Differentiation," Management Science, INFORMS, vol. 43(1), pages 40-53, January.
    26. Karthik Ramachandran & V. Krishnan, 2008. "Design Architecture and Introduction Timing for Rapidly Improving Industrial Products," Manufacturing & Service Operations Management, INFORMS, vol. 10(1), pages 149-171, December.
    27. Yen-Ting Lin & Ying-Ju Chen, 2015. "Competitive outsourcing: choosing between value-added services and key component supplying capability," International Journal of Production Research, Taylor & Francis Journals, vol. 53(12), pages 3635-3650, June.
    28. Dietmar Harhoff, 1996. "Strategic Spillovers and Incentives for Research and Development," Management Science, INFORMS, vol. 42(6), pages 907-925, June.
    29. Albert Y. Ha & Shilu Tong, 2008. "Contracting and Information Sharing Under Supply Chain Competition," Management Science, INFORMS, vol. 54(4), pages 701-715, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Baozhuang Niu & Kanglin Chen & Lei Chen & Chao Ding & Xiaohang Yue, 2021. "Strategic Waiting for Disruption Forecasts in Cross‐Border E‐Commerce Operations," Production and Operations Management, Production and Operations Management Society, vol. 30(9), pages 2840-2857, September.
    2. Du, Xianjin & Zhan, Huimin & Zhu, Xiaoxuan & He, Xiuli, 2021. "The upstream innovation with an overconfident manufacturer in a supply chain," Omega, Elsevier, vol. 105(C).
    3. Zhang, Qiao & Wang, Kai & Feng, Lin & Dai, Rui, 2023. "For better or worse: Impacts of information leakage by a common supplier with innovation imitation of downstream firms," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 170(C).
    4. Xia, Jing & Niu, Wenju & Chen, Xiaolin & Zhang, Lianmin, 2023. "Investing in a shared supplier to encourage environmental responsibility under spillovers and demand uncertainty," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 174(C).
    5. Jasper Veldman & Edward Anderson & Niels J. Pulles & Gerard Gaalman, 2023. "Developing a shared supplier with endogenous spillovers," Production and Operations Management, Production and Operations Management Society, vol. 32(3), pages 723-739, March.
    6. Lopez, Carmen & Yacine Haddoud, Mohamed & Kasturiratne, Dulekha, 2022. "Revisiting the innovation–export entry link through a configuration approach," Journal of Business Research, Elsevier, vol. 149(C), pages 927-937.
    7. Niu, Baozhuang & Zeng, Fanzhuo & Liu, Yaoqi, 2021. "Firms’ introduction of internet-based installment: Incremental demand vs. cash opportunity cost," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 152(C).
    8. Zhang, Xiuyi & Hou, Wenhua, 2022. "The impacts of e-tailer's private label on the sales mode selection: From the perspectives of economic and environmental sustainability," European Journal of Operational Research, Elsevier, vol. 296(2), pages 601-614.
    9. Niu, Baozhuang & Chen, Yuyang & Zeng, Fanzhuo, 2023. "One step further for procurement cooperation: Will the industry leader benefit from its competitive manufacturer's joint determination of consumption quality?," European Journal of Operational Research, Elsevier, vol. 311(3), pages 989-1008.
    10. Kong, Junjun & Chua, Geoffrey A. & Yang, Feng, 2023. "Firms’ cooperation on recycling investments in a three-echelon reverse supply chain," International Journal of Production Economics, Elsevier, vol. 263(C).
    11. Zhang, Qiao & Chen, Jing & Chen, Bintong, 2021. "Information strategy in a supply chain under asymmetric customer returns information," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 155(C).
    12. Hubert Pun & Pengwen Hou, 2022. "Combating copycatting from emerging market suppliers in global supply chains," Production and Operations Management, Production and Operations Management Society, vol. 31(8), pages 3304-3319, August.
    13. Ali, Usman & Li, Yanxi & Wang, Jian-Jun & Yue, Xiaohang & Chang, Ai-Chih (Jasmine), 2021. "Dynamics of outward FDI and productivity spillovers in logistics services industry: Evidence from China," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 148(C).
    14. Maximilian Klöckner & Christoph G. Schmidt & Stephan M. Wagner, 2022. "When Blockchain Creates Shareholder Value: Empirical Evidence from International Firm Announcements," Production and Operations Management, Production and Operations Management Society, vol. 31(1), pages 46-64, January.
    15. Yan, Yingchen & Zhao, Qiuhong & Qin, Zhongfeng & Lev, Benjamin, 2022. "Inter-competitor outsourcing: On the advantages of profit and product launching time," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 158(C).
    16. Li, Wei & Zhao, Xuan & Chen, Jing, 2023. "Co-opetition or decentralization? A study of manufacturers’ sourcing and distribution strategies," European Journal of Operational Research, Elsevier, vol. 311(3), pages 867-886.
    17. Zhang, Manman & Zhang, Juliang & Sun, Yue & Cheng, T.C.E., 2022. "How to outsource production considering quality management: Turnkey or buy-sell?," Omega, Elsevier, vol. 113(C).
    18. Li, Zhiwen & Xu, Xianhao & Bai, Qingguo & Guan, Xu & Zeng, Kuan, 2021. "The interplay between blockchain adoption and channel selection in combating counterfeits," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 155(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wenjie Tang & Tong Wang & Wenxin Xu, 2022. "Sooner or Later? The Role of Adoption Timing in New Technology Introduction," Production and Operations Management, Production and Operations Management Society, vol. 31(4), pages 1663-1678, April.
    2. Yan, Yingchen & Zhao, Ruiqing & Xing, Tiantian, 2019. "Strategic introduction of the marketplace channel under dual upstream disadvantages in sales efficiency and demand information," European Journal of Operational Research, Elsevier, vol. 273(3), pages 968-982.
    3. Mandal, Prasenjit & Jain, Tarun, 2021. "Partial outsourcing from a rival: Quality decision under product differentiation and information asymmetry," European Journal of Operational Research, Elsevier, vol. 292(3), pages 886-908.
    4. Li, Li & Jiang, Li, 2022. "Saving costs and improving selling through competitor cooperation in sourcing," European Journal of Operational Research, Elsevier, vol. 302(3), pages 970-982.
    5. Chen, Jingxian & Liang, Liang & Yao, Dong-qing, 2019. "Factory encroachment and channel selection in an outsourced supply chain," International Journal of Production Economics, Elsevier, vol. 215(C), pages 73-83.
    6. Zhang, Li-Hao & Li, Wen-Jing & Zhang, Cheng & Wang, Shanshan, 2023. "Outsourcing strategy of an original equipment manufacturer in a sustainable supply chain: Whether and how should a contract manufacturer encroach?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 174(C).
    7. Wei, Liqun & Zhang, Jianxiong & Zhu, Guowei, 2021. "Incentive of retailer information sharing on manufacturer volume flexibility choice," Omega, Elsevier, vol. 100(C).
    8. Albert Y. Ha & Huajiang Luo & Weixin Shang, 2022. "Supplier Encroachment, Information Sharing, and Channel Structure in Online Retail Platforms," Production and Operations Management, Production and Operations Management Society, vol. 31(3), pages 1235-1251, March.
    9. Niu, Baozhuang & Ruan, Yiyuan & Zeng, Fanzhuo, 2022. "Promoting remanufacturing through subsidy and environment tax: Channel co-opetition, incentive alignment and regulation optimization," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 166(C).
    10. Niu, Baozhuang & Wang, Yulan & Guo, Pengfei, 2015. "Equilibrium pricing sequence in a co-opetitive supply chain with the ODM as a downstream rival of its OEM," Omega, Elsevier, vol. 57(PB), pages 249-270.
    11. Krishnan S. Anand & Karan Girotra, 2007. "The Strategic Perils of Delayed Differentiation," Management Science, INFORMS, vol. 53(5), pages 697-712, May.
    12. Liu, Guanmei & Shao, Xiaofeng & Lang, Xiao, 2020. "On the interaction of technology upgrade and buyer entry in a supply chain," International Journal of Production Economics, Elsevier, vol. 221(C).
    13. Oded Berman & Mohammad M. Fazel-Zarandi & Dmitry Krass, 2019. "Truthful Cheap Talk: Why Operational Flexibility May Lead to Truthful Communication," Management Science, INFORMS, vol. 65(4), pages 1624-1641, April.
    14. Long Gao & Liang Guo & Adem Orsdemir, 2021. "Dual‐Channel Distribution: The Case for Cost Information Asymmetry," Production and Operations Management, Production and Operations Management Society, vol. 30(2), pages 494-521, February.
    15. Weili Xue & Jiaojiao Zuo & Xiaolin Xu, 2017. "Analysis of market competition and information asymmetry on selling strategies," Annals of Operations Research, Springer, vol. 257(1), pages 395-421, October.
    16. Li Chen & Bin Hu, 2017. "Is Reshoring Better Than Offshoring? The Effect of Offshore Supply Dependence," Manufacturing & Service Operations Management, INFORMS, vol. 19(2), pages 166-184, May.
    17. Robert Swinney & Gérard P. Cachon & Serguei Netessine, 2011. "Capacity Investment Timing by Start-ups and Established Firms in New Markets," Management Science, INFORMS, vol. 57(4), pages 763-777, April.
    18. Chen, Jing & Pun, Hubert & Zhang, Qiao, 2023. "Eliminate demand information disadvantage in a supplier encroachment supply chain with information acquisition," European Journal of Operational Research, Elsevier, vol. 305(2), pages 659-673.
    19. Li-Hao Zhang & Shan-Shan Wang, 2022. "Strategic analysis of RFID adoption sequences in a supply chain with Cournot competition: effects of ordering-timing strategies," Annals of Operations Research, Springer, vol. 315(2), pages 2169-2208, August.
    20. Niu, Baozhuang & Chen, Yuyang & Zeng, Fanzhuo, 2023. "One step further for procurement cooperation: Will the industry leader benefit from its competitive manufacturer's joint determination of consumption quality?," European Journal of Operational Research, Elsevier, vol. 311(3), pages 989-1008.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:popmgt:v:29:y:2020:i:10:p:2252-2267. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1937-5956 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.