Organizational Outsourcing Strategy Positive and Negative Influence

Nowadays, there is a growing stream of organizations need to research into the outsourcing of innovation activities within the innovation, management, marketing and economics disciplines. These organizations need to understand how with the outsourcing practice becoming more commonplace in their industry. However, their behaviors bring these two questions: Whether outsource or internalize innovation activities and the performance implications of this decision can support for both transaction cost and resource based arguments is examined with both theory bases showing substantial attention? Whether outsourcing innovation activities can lead to faster product development and cost savings? On advantages hand, it is possible that outsourcing may lead to higher costs and slower new product development. Further the technological uncertainty may have conflicting impacts on the outsourcing decision that are not yet well understand. When outsourcing product development has reduced costs and has proved speed to market. On disadvantages hand, outsourcing has also reduce product development time delays and higher quality concerns. Why to cause performance implications of outsourced innovation activities in transaction in cost economics and the resource-based view point? When outsourcing product development has been to reduce costs and has improved speed to market, outsourcing product development is not unlike other make or buy decisions. So, make vs buy decision is similar to logistic and IT outsourcing. Internalization of product development will be preferred when transaction costs are excessive. Otherwise, the market i.e. outsourcing will be selected when transaction costs are low. Transaction costs can include adaption, safeguarding and measurement costs. Adaption costs represent efforts to adjust contract to change conditions and are a result of environmental uncertainty. When a firm may have to revise on agreement with a partner company, this facing substantial penalties, due to an unstable market environments, the firm is likely to perform this function internally. Safeguarding costs characterize the costs of an outsourcing provider acting opportunities after investments have been made in the inter-firm relationship and are the result of transaction specific investment. Measurement costs include all expenses with confirming that contracts have been fulfilled passably. The contracting firm may face substantial costs to estimate quality for contractual services. When the sum total of these transaction costs is substantial, internalization will be favored.