Journal
PRODUCTION AND OPERATIONS MANAGEMENT
Volume 29, Issue 10, Pages 2252-2267Publisher
WILEY
DOI: 10.1111/poms.13222
Keywords
knowledge spillover; strategic outsourcing; co-opetition; supplier encroachment
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When an innovator outsources the manufacturing of an innovative product to a contract manufacturer (CM) which is also a competitor in the end market, the potential innovation spillover may be a serious concern. We study an innovator's outsourcing decision under spillover risks with an emphasis on theex anteuncertain values of innovations, and distinguish between technical innovations which can only spill over through outsourcing and non-technical innovations which can also spill over in the market. We find that in both cases an innovator may strategically outsource to a competitor-CM, albeit for distinct motivations: for technical innovations, it is done so that the competitor-CM would yield market leadership to the innovator; and for non-technical innovations, it is done so that the competitor-CM would face innovation uncertainties alongside the innovator.
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