Page 79 - 臺大管理論叢第33卷第1期

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

offshore locations, which has been downplayed in the IB literature (e.g., Chen and Hsiao,
2013) till now. As some developing countries might offer low-cost and high-talented
human capital, they might also pose the risks of weak IPR protection and ineffective
legal systems. Since weak IPR protection can erode the appropriable value of offshoring

innovation in those countries and might deter firms from outsourcing innovation activities
to those countries (e.g., Contractor et al., 2010; Gooris and Peeters, 2016), we propose
two moderating mechanisms–task specificity and project modularity–on the basis of

knowledge and activity partitioning (e.g., Takeishi, 2002). Using both task specificity
and project modularity, we show how firms protect their proprietary information and
knowledge when outsourcing innovation in countries with weak IPR protection. Although
it is well established in the literature that internalization allows firms to capture value
from their innovation activities in the countries with weak IPR protection (e.g., Alcácer

and Zhao, 2012; Almeida and Phene, 2004; Feinberg and Gupta, 2009; Zhao, 2006), this
stream of research offers only a partial explanation as internalization may not be realistic,
feasible, or efficient, particularly when firms outsource innovation activities offshore. To

complement this stream of research, we also provide another theoretical lens to show how
firms may use alternative mechanisms to affect their offshore outsourcing strategies in
countries with weak IPR protection.
Last but not least, we provide theoretical grounding and empirical supports for
studies of global outsourcing and offshoring on IPR protection, which propose the use

of a valid mechanism in designing tasks to mitigate possible risks of knowledge leakage
(e.g., Belderbos et al., 2021; Gooris and Peeters, 2016; Jensen et al., 2013; Srikanth and
Puranam, 2011). As we examine the impact of task specificity on offshore innovation

outsourcing in countries with weak IPR protection, task specificity is understood as
disaggregating an innovation activity into independent specific tasks. When outsourcing
only a discrete task of the entire innovation activity to an individual contract provider
that is unable to put the whole system together, the risk of knowledge leakage is limited
(Contractor et al., 2010). This is, therefore, one type of task design that leverages specific,

safe, and discrete portions of an innovation activity. Another way to minimize knowledge
leakage is by project modularity when interdependent tasks cannot be specifically divided.
By modularizing interdependent tasks in a project, project modularity can help outsourcing

firms decrease the incentive and mitigate the risk of knowledge leakages from contract

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