R&D Sourcing Strategies: Determinants and Consequences

Abstract

Achieving the desired outcomes of research and development (R&D) sourcing remains the most critical but yet elusive agenda for all firms. Relevant literature continues to debate on how different R&D sourcing strategies can have different impacts on firms. This study aims to examine: (1) how different R&D sourcing strategies (via a combination of different R&D sourcing arrangements and types of product innovation) are influenced by organizational determinants (i.e. technological complementarity, technological codification, and technological competency) and (2) the impact of such strategies on organizational consequences in terms of development costs and financial profits during the new product development (NPD) process. Results from 121 Taiwanese IT firms indicate that R&D outsourcing is effective in lowering development costs and in lifting financial profits when products are developed under adaptive innovation. The results also demonstrate that in-house R&D sourcing brings in more financial profits for firms when products are developed under incremental innovation. A key contribution of the paper is the development of a R&D sourcing strategy matrix model. The model can be used to assist firms in selecting the right combination of R&D sourcing arrangements and product innovation types at the outset of NPD projects in order to obtain the intended outcomes.