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E-ISSN : 2288-2766
The Impact of Outsourcing Strategy on a Firm’s Innovation and Internationalization
Youngwoo Lee
Abstract
Purpose – Based on transaction cost perspective and institution-based perspective, this research attempts to investigate the effect of outsourcing on a firm’s performance and how it interacts with institutional context in which the firms operate. Research design, data, and methodology –With a sample of 164 manufacturing firms form South Korea, we examine the direct effects of outsourcing on the a firm’s level of product innovation and internationalization and the moderating effects of competitive pressure and property right protection as important external factors that could affect the effectiveness of outsourcing decision. Result – The findings show that outsourcing not only enhance a firm’s capability to concentrate on its core competencies, but also to increase a firm’s combinative capacity to acquire external knowledge. Furthermore, we finds that in a highly competitive environment, potential knowledge spillovers to other competitors may attenuate the potential benefits of outsourcing. Conclusion – Outsourcing can enhance a firm’s innovation activities by providing valuable access to external knowledge and also to complementary resources from the external partners, which in turn enables firms to focus on core competences.
- keywords
- Outsourcing, Product innovation, Internationalization, Competitive pressure, Property right
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