Page 49 - 臺大管理論叢第33卷第1期

NTU Management Review Vol. 33 No. 1 Apr. 2023

1. Introduction

Offshore outsourcing innovation is one stream of research on the internationalization
of innovation in the International Business (IB) literature (Contractor, Kumar, Kundu,

and Pedersen, 2010, 2011). When conducting offshore outsourcing innovation, firms
can choose developing countries as the locations of knowledge accessing and sourcing.
In general, offshore innovation outsourcing in developing counties creates value for

outsourcing firms since it helps them attain and sustain competitive advantage by saving
costs (Kedia and Mukherjee, 2009), obtaining resources (Massini, Perm-Ajchariyawong,
and Lewin, 2010), entering markets (Larsen, Manning, and Pedersen, 2013), and
enhancing innovativeness (Belderbos, Park, and Carree, 2021). Nonetheless, developing
countries are often characterized by high legal risk and weak Intellectual Property Right

(IPR) protection (Holmes, Li, Hitt, DeGhetto, and Sutton, 2016; Hoskisson, Eden, Lau,
and Wright, 2000; Keupp, Beckenbauer, and Gassmann, 2009; Peng and Heath, 1996; Xie,
Peng, and Zhao, 2013). Given that, offshore outsourcing innovation might incur the risk

of knowledge leakage to other companies and even to competitors in developing countries
(Buss and Peukert, 2015; Martínez-Noya and García-Canal, 2018). More importantly,
such a risk could challenge outsourcing firms to capture the value created through offshore
innovation outsourcing (Brander, Cui, and Vertinsky, 2017; Bruno, Crescenzi, Estrin, and
Petralia, 2021).

However, the answers to why firms take the risk on outsourcing innovation in
developing countries and how they manage it remain unclear. We find that the extant
research mainly focuses on examining the value creation of offshore outsourcing

innovation from the theories of Transaction-cost Economics (TCE) and Resource-
based View (RBV) but pays scant attention to the value capture of offshore outsourcing
innovation. For example, the TCE school often asserts that firms conduct outsourcing
at the lowest-cost level to gain cost advantages (Murray and Kotabe, 1999). Although
lowering cost is sufficient for firms to outsource innovation offshore, it is not necessary

for them to do so in developing countries. More than that, the TCE school hypothesizes
that firms will not outsource high-value activities, such as R&D and innovation, to
locations characterized by a high potential risk (Contractor et al., 2010). Since we have

already witnessed that firms have been increasingly outsourcing innovation to developing

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