Scandinavian Working Papers in Economics

Papers in Innovation Studies,
Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy

No 2013/44: The Impact of Innovation Off-shoring on Organizational Adaptability

Elisabeth Baier (), Christian Rammer () and Torben Schubert ()
Additional contact information
Elisabeth Baier: PTV Group AG, Germany
Christian Rammer: ZEW, Germany, Postal: CIRCLE, Lund University, PO Box 117, SE-22100 Lund, Sweden
Torben Schubert: CIRCLE, Lund University, Sweden and Fraunhofer Institute for Systems and Innovation Research, Germany, Postal: CIRCLE, Lund University, PO Box 117, SE-22100 Lund, Sweden

Abstract: We analyze the effects of captive off-shoring of innovation activities on the firms’ ability to adapt its organizational structures. Basing our arguments on complexity theory, we use three consecutive waves of the German part of the Community Innovation Survey to test our hypotheses. We find an inverted u-shape of innovation off-shoring on the effectiveness of organizational adaptability, implying an optimal threshold value of innovation off-shoring. This value is 11% for the share of off-shored R&D, 15% for downstream innovation activities such as local market adaptation, and 34% for design activities. We also analyze several contingency variables. In particular we show that the costs of innovation off-shoring in terms of reduced organizational adaptability are exacerbated by a strong focus on R&D and a strong embeddedness in on-shore networks. Smaller firms find it easier to deal with the management complexity induced by geographical dispersion of innovation activities because of their greater flexibility.

Keywords: Internationalization; Off-Shoring; Innovation; R&D; Organizational Adaptation; Organizational Adaptability

JEL-codes: L23; L25; M16; O32

33 pages, December 20, 2013

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201344_Baier_et_al.pdf PDF-file 

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