East Asian Journal of Business Economics (EAJBE) (동아시아경상학회지)

East Asia Business Economics Association (동아시아경상학회)
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The Impact of Outsourcing Strategy on a Firm's Innovation and Internationalization

  • Received : 2019.05.17
  • Accepted : 2019.12.22
  • Published : 2019.12.30
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Abstract

Purpose - Based on transaction cost perspective and institution-based perspective, this research attempts to investigate the effect of outsourcing on a firm's performance and how it interacts with institutional context in which the firms operate. Research design, data, and methodology -With a sample of 164 manufacturing firms form South Korea, we examine the direct effects of outsourcing on the a firm's level of product innovation and internationalization and the moderating effects of competitive pressure and property right protection as important external factors that could affect the effectiveness of outsourcing decision. Result - The findings show that outsourcing not only enhance a firm's capability to concentrate on its core competencies, but also to increase a firm's combinative capacity to acquire external knowledge. Furthermore, we finds that in a highly competitive environment, potential knowledge spillovers to other competitors may attenuate the potential benefits of outsourcing. Conclusion - Outsourcing can enhance a firm's innovation activities by providing valuable access to external knowledge and also to complementary resources from the external partners, which in turn enables firms to focus on core competences.

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