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External technology supply and client-side innovation

  • Peukert, Christian

Flexibility in response to competitive pressure from globalized markets and increasingly individualized customer desires has become vital for firms. A common strategy to address this challenge is to employ a dynamic concept of organization and reach beyond the boundaries of the firm. Accordingly, technology transfer from providers of knowledge intensive business services attracts more and more attention. In this context we focus on external supply of information technology and client-side innovation. The aim of this paper is to contribute to resolving an empirical puzzle arising from the prior literature. Some authors find beneficial effects of IT outsourcing, others underline that firms often fail to achieve expected strategic goals. Our stylized theoretical model combines a knowledge production function framework and transaction cost economics. We hypothesize that the right balance between internal and external knowledge is critical for innovation. The empirical application is German firm-level data covering a wide range of industries from 2003 to 2006. Our results largely support the theoretical arguments and suggest a positive linear relationship between the level of outsourcing and process innovation. For product innovation we find a hump-shape.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 11-082.

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Date of creation: 2011
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Handle: RePEc:zbw:zewdip:11082
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  1. Dirk Czarnitzki & Alfred Spielkamp, 2003. "Business services in Germany: bridges for innovation," The Service Industries Journal, Taylor & Francis Journals, vol. 23(2), pages 1-30, March.
  2. Barras, Richard, 1986. "Towards a theory of innovation in services," Research Policy, Elsevier, vol. 15(4), pages 161-173, August.
  3. Bertschek, Irene, 1995. "Product and Process Innovation as a Response to Increasing Import and Foreign Direct Investment," Journal of Industrial Economics, Wiley Blackwell, vol. 43(4), pages 341-57, December.
  4. Stefan Bauernschuster & Oliver Falck & Stephan Heblich, 2009. "Training and Innovation," Journal of Human Capital, University of Chicago Press, vol. 3(4), pages 323-353.
  5. Lind, Jo Thori & Mehlum, Halvor, 2007. "With or Without U? The appropriate test for a U shaped relationship," Memorandum 21/2007, Oslo University, Department of Economics.
  6. Görg, Holger & Hanley, Aoife, 2009. "Services outsourcing and innovation: An empirical investigation," CEPR Discussion Papers 7390, C.E.P.R. Discussion Papers.
  7. Pol Antras & Elhanan Helpman, 2003. "Global Sourcing," Harvard Institute of Economic Research Working Papers 2005, Harvard - Institute of Economic Research.
  8. Paul Windrum & Andreas Reinstaller & Christopher Bull, 2009. "The outsourcing productivity paradox: total outsourcing, organisational innovation, and long run productivity growth," Journal of Evolutionary Economics, Springer, vol. 19(2), pages 197-229, April.
  9. Claudio A . Piga & Marco Vivarelli, 2004. "Internal and External R&D: A Sample Selection Approach," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(4), pages 457-482, 09.
  10. repec:hrv:faseco:4784029 is not listed on IDEAS
  11. Sascha Becker & Peter Egger, 2013. "Endogenous product versus process innovation and a firm’s propensity to export," Empirical Economics, Springer, vol. 44(1), pages 329-354, February.
  12. Engelstätter, Benjamin & Sarbu, Miruna, 2010. "Enterprise software and service innovation: Standardization versus customization," ZEW Discussion Papers 10-100, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  13. Miozzo, Marcela & Grimshaw, Damian, 2005. "Modularity and innovation in knowledge-intensive business services: IT outsourcing in Germany and the UK," Research Policy, Elsevier, vol. 34(9), pages 1419-1439, November.
  14. Ohnemus, Jörg, 2007. "Does IT Outsourcing Increase Firm Success? An Empirical Assessment using Firm-Level Data," ZEW Discussion Papers 07-087, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  15. Antonelli, Cristiano, 2003. "Localized Technological Change," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 200305, University of Turin.
  16. Gooroochurn, Nishaal & Hanley, Aoife, 2007. "A tale of two literatures: Transaction costs and property rights in innovation outsourcing," Research Policy, Elsevier, vol. 36(10), pages 1483-1495, December.
  17. David Audretsch & Marcel Hülsbeck & Erik Lehmann, 2012. "Regional competitiveness, university spillovers, and entrepreneurial activity," Small Business Economics, Springer, vol. 39(3), pages 587-601, October.
  18. Christoph Grimpe & Ulrich Kaiser, 2010. "Balancing Internal and External Knowledge Acquisition: The Gains and Pains from R&D Outsourcing," Journal of Management Studies, Wiley Blackwell, vol. 47(s2), pages 1483-1509, December.
  19. Tether, Bruce S. & Tajar, Abdelouahid, 2008. "Beyond industry-university links: Sourcing knowledge for innovation from consultants, private research organisations and the public science-base," Research Policy, Elsevier, vol. 37(6-7), pages 1079-1095, July.
  20. Caroline Freund & Diana Weinhold, 2002. "The Internet and International Trade in Services," American Economic Review, American Economic Association, vol. 92(2), pages 236-240, May.
  21. Erik Lehmann & Doris Neuberger & Solvig R”thke, 2004. "Lending to Small and Medium-Sized Firms: Is There an East-West Gap in Germany?," Small Business Economics, Springer, vol. 23(1), pages 23-39, 08.
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