Scandinavian Working Papers in Economics

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

No 2015/22: The Impact of Captive Innovation Offshoring on the Effectiveness of Organizational Adaptation

Elisabeth Baier (), Christian Rammer () and Torben Schubert ()
Additional contact information
Elisabeth Baier: PTV Group AG, Karlsruhe, Germany
Christian Rammer: ZEW, Mannheim, Germany
Torben Schubert: CIRCLE, Lund University & Fraunhofer ISI, Karlsruhe, Germany

Abstract: We analyze the effects of captive offshoring of innovation activities on the ability of the firms to adapt their 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 offshoring on the effectiveness of organizational adaptability, implying an optimal threshold value of innovation offshoring. This value is 11% for share of offshored 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 offshoring in terms of reduced organizational adaptation are increased by a regional dispersion of the offshoring activities and strong embeddedness in onshore networks. We also show that smaller firms find it easier to deal with the management complexity induced by geographical dispersion of innovation activities.

Keywords: Internationalization; Offshoring; Innovation; Organizational Adaptation; Organizational Adaptability

JEL-codes: O31; O32

32 pages, June 21, 2015

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201522_baier_et_al.pdf PDF-file 

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