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

seeking (Maskell, Pedersen, Petersen, and Dick-Nielsen, 2007). In addition, outsourcing
firms initiate the knowledge transfer and knowledge building by absorbing particular
knowledge from an external source (Chen, McQueen, and Sun, 2013) and by tapping into
foreign knowledge (Berry and Kaul, 2015). Moreover, firms play the role of knowledge

organizer and coordinator in offshoring (Asmussen, Larsen, and Pedersen, 2016). Taken
together, this stream of research reflects the central notion of the KBV perspective (Grant
and Phene, 2022).

2.2 The KBV Perspective, Human Capital, and Offshore Outsourcing Innovation

The KBV perspective assumes that the creation of knowledge (e.g., Nonaka and
Takeuchi, 1995), the use of knowledge (e.g., Carlile, 2004), and the integration of
knowledge (e.g., Grant, 1996; Spender, 1996) all provide unique inputs for the competitive
advantages of a firm. As a firm acquires, protects, and integrates special knowledge, the
knowledge is held by individuals and embedded in the human capital within the firm

(Bowman and Swart, 2007). According to this view, human capital is recognized as a firm-
specific, valuable asset when firms can retain it by expecting and training their employees
to acquire firm-specific knowledge and skills (Chen and Huang, 2009). From the KBV

perspective, we then argue that offshore innovation outsourcing can be driven by the need
of human capital. Indeed, the availability of human capital in a country plays a critical
role in that location being selected as an offshoring destination (Graf and Mudambi,
2005; Kedia and Mukherjee, 2009). This suggests that offshore innovation outsourcing is
increasingly about sourcing human capital from everywhere (Musteen et al., 2017) and

that firms with the capability to integrate knowledge are able to benefit from the available
human capital across different offshore units (Belderbos et al., 2021).

2.3 Outsourcing Innovation Activities to Create Value in Developing Countries
Offshore innovation outsourcing is an important value-creation activity for

outsourcing firms. In the last three decades, the scholars of global offshoring and
outsourcing have witnessed a growing number of European and US firms outsourcing
innovation activities to developing countries (e.g., Martínez-Noya, García-Canal, and
Guillén, 2012; Sartor and Beamish, 2014; Quan and Chesbrough, 2010). Traditionally,

they create value by exploiting and/or augmenting cost advantages. Such advantages

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