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Performance implications of outsourcing for technological innovations: managing the efficiency and adaptability trade‐off

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  • Carmen Weigelt
  • MB Sarkar

Abstract

We explore how increasing efficiency compromises adaptability when a firm outsources during the emergent stages of a technological innovation. Since efficiency ‐related problems differ in complexity and structure from those associated with adaptability, their optimal governance differs. While the former benefits from outsourcing, the latter is better off managed within organizational boundaries. In addition, a firm's ability to engage in complex problem solving buffers the efficiency‐adaptability trade‐off that occurs with increasing levels of outsourcing. In this study, we find support for our theses. Although outsourcing yields efficiency gains up to a certain point, it hurts adaptability. However, a firm's absorptive capacity mitigates this trade‐off. Our data on outsourcing for Internet banking is both archival and based on two surveys conducted with 100 U.S. banks. Copyright © 2011 John Wiley & Sons, Ltd.

Suggested Citation

  • Carmen Weigelt & MB Sarkar, 2012. "Performance implications of outsourcing for technological innovations: managing the efficiency and adaptability trade‐off," Strategic Management Journal, Wiley Blackwell, vol. 33(2), pages 189-216, February.
    • Handle: RePEc:bla:stratm:v:33:y:2012:i:2:p:189-216
    DOI: 10.1002/smj.951
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    4. Abdul Qadir Rahomee & Dileep Kumar M, 2014. "The Mediating Role of Absorptive Capacity in Its Effect on Organizational Support Factors and Technological Innovation," Information Management and Business Review, AMH International, vol. 6(1), pages 25-41.
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    9. Carolina Rojas-Córdova & Amanda J. Williamson & Julio A. Pertuze & Gustavo Calvo, 2023. "Why one strategy does not fit all: a systematic review on exploration–exploitation in different organizational archetypes," Review of Managerial Science, Springer, vol. 17(7), pages 2251-2295, October.
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    14. Wadesango N & Gwangwadza D C & Mhaka C & Wadesango V O, 2018. "The Impact of Labour Force Reduction on the Financial Performance of Manufacturing Companies," Journal of Economics and Behavioral Studies, AMH International, vol. 10(2), pages 20-32.
    15. Thakur-Wernz, Pooja & Bruyaka, Olga & Contractor, Farok, 2020. "Antecedents and relative performance of sourcing choices for new product development projects," Technovation, Elsevier, vol. 90.
    16. Sara Alonso-Muñoz & Eva Pelechano-Barahona & Rocío González-Sánchez, 2020. "Participation in Group Companies as a Source of External Knowledge in Obtaining and Making Profitable Radical Innovations," Sustainability, MDPI, vol. 12(18), pages 1-19, September.
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    18. Xiaozhen Wang & Ki-Hyun Um & Shu Wang & Mingu Kang, 2023. "The mediating role of key supplier adaptability and involvement in the relationship between supplier relationship management and NPD project success," Operations Management Research, Springer, vol. 16(2), pages 794-807, June.
    19. Bauer, Florian & King, David & Matzler, Kurt, 2016. "Speed of acquisition integration: Separating the role of human and task integration," Scandinavian Journal of Management, Elsevier, vol. 32(3), pages 150-165.
    20. Makridis, Christos A. & Han, Joo Hun, 2021. "Future of work and employee empowerment and satisfaction: Evidence from a decade of technological change," Technological Forecasting and Social Change, Elsevier, vol. 173(C).
    21. Nahid Akhter & M. A. Baqui Khalily, 2020. "An Analysis of Mobile Financial Services and Financial Inclusion in Bangladesh," Indian Journal of Human Development, , vol. 14(2), pages 213-233, August.
    22. Shubham Gupta & Abhishek Roy & Subodha Kumar & Ram Mudambi, 2023. "When Worse Is Better: Strategic Choice of Vendors with Differentiated Capabilities in a Complex Cocreation Environment," Management Science, INFORMS, vol. 69(5), pages 2833-2851, May.

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