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Value Creation and Capture in Developing Countries: The Driver and Mechanism of Offshore Outsourcing
Innovation

countries (Bertrand and Mol, 2013; Howells, Gagliardi, and Malik, 2008; Martínez-Noya
and García-Canal, 2018; Sartor and Beamish, 2014), we believe the TCE school might
overlook the way that firms capture value from outsourcing innovation in developing
countries characterized by both high legal risk and weak IPR protection.

On the other hand, the RBV scholars have indicated that offshore outsourcing can
give a firm the opportunity to access rare resources (Bunyaratavej, Doh, Hahn, Lewin, and
Massini, 2011). Indeed, offshore innovation outsourcing can provide access to the rare

resources owned by offshore contractor providers; however, the value created through this
access is no longer entirely unique, rare, or inimitable for outsourcing firms to capture
and appropriate (Doh, 2005). Besides, RBV is limited in cases featuring higher levels of
disaggregation, which reduces firm-specific competencies and resources (Rodgers, Khan,
Tarba, Nurgabdeshov, and Ahammad, 2019). In these cases, RBV might underexplore the

possible mechanisms that outsourcing firms could use to capture value from outsourcing
innovation in developing countries.
Therefore, this study adopts the perspective of Knowledge-based View (KBV) as the

theoretical lens to explore the abovementioned research issues and aims to fill the research
gap. Specifically, the KBV perspective proposes that the performance of a firm depends on
its creation, management and use of knowledge from, within, and outside its boundaries
(Grant, 1996; Kogut and Zander, 1992; Nonaka and Takeuchi, 1995). Since knowledge is
embedded in human capital within a firm and cannot be easily transferred (Grant, 1996),

leveraging and utilizing human capital enable firms to create value and sustain competitive
advantage (Chen and Huang, 2009).
Extending from this perspective, we argue that an outsourcing firm plays the role as

an organizer of knowledge to access and manage human capital when conducting offshore
innovation outsourcing in developing countries. Firstly, firms have a strong need of human
capital for conducting innovation activities such as R&D, product design, and engineering
services (Demirbag and Glaister, 2010; Graf and Mudambi, 2005; Musteen and Ahsan,
2013). As human capital is critical for firms to succeed in conducting innovation activities,

developing countries can be excellent sources of human capital, in terms of the availability
of human capital including low-cost and high-skilled technicians, scientists, and engineers
(Holmes et al., 2016; Jensen, Larsen, and Pedersen, 2013; Li and Scullion, 2006). The

availability of human capital in developing countries thus encourages outsourcing firms

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