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The Impact of Innovation Off-shoring on Organizational Adaptability

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  • Baier , Elisabeth

    (PTV Group AG, Germany)

  • Rammer , Christian

    (ZEW, Germany)

  • Schubert , Torben

    (CIRCLE, Lund University, Sweden and Fraunhofer Institute for Systems and Innovation Research, Germany)

Abstract

We analyze the effects of captive off-shoring of innovation activities on the firms’ ability to adapt its organizational structures. Basing our arguments on complexity theory, we use three consecutive waves of the German part of the Community Innovation Survey to test our hypotheses. We find an inverted u-shape of innovation off-shoring on the effectiveness of organizational adaptability, implying an optimal threshold value of innovation off-shoring. This value is 11% for the share of off-shored R&D, 15% for downstream innovation activities such as local market adaptation, and 34% for design activities. We also analyze several contingency variables. In particular we show that the costs of innovation off-shoring in terms of reduced organizational adaptability are exacerbated by a strong focus on R&D and a strong embeddedness in on-shore networks. Smaller firms find it easier to deal with the management complexity induced by geographical dispersion of innovation activities because of their greater flexibility.

Suggested Citation

  • Baier , Elisabeth & Rammer , Christian & Schubert , Torben, 2013. "The Impact of Innovation Off-shoring on Organizational Adaptability," Papers in Innovation Studies 2013/44, Lund University, CIRCLE - Centre for Innovation Research.
    • Handle: RePEc:hhs:lucirc:2013_044
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    Keywords

    Internationalization; Off-Shoring; Innovation; R&D; Organizational Adaptation; Organizational Adaptability;
    All these keywords.

    JEL classification:

    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M16 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - International Business Administration
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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