Industry growth and the knowledge spillover regime: Does outsourcing harm innovativeness but help profit?

The outsourcing of innovation activities, geographic clustering of firms, and mobility of labor each allow knowledge to circulate within industries. This study investigates knowledge spillover mechanisms' effects on industry innovativeness and profit, and how these effects change with the level of industry growth. Generally, the set of hypotheses presented suggests enhanced performance effects from knowledge spillover mechanisms under growth; the pace of developments in growth industries increases the importance of access to knowledge. Analysis of an industry-level data set assembled from five secondary sources consists of both regression and fuzzy set qualitative comparative analysis (fsQCA). While regression detects the discrete effects of each mechanism, fsQCA identifies specific configurations of these mechanisms associated with the outcome, emphasizing causal complexity. In general, outsourcing negatively affects innovativeness (though one identified configuration represents a unique case within which outsourcing can aid innovativeness), but benefits profitability. All three elements of the knowledge spillover regime examined here have performance implications contingent on growth.