Outsourcing and knowledge integration in new product development

Abstract: This thesis deals with two aspects of knowledge needed for new product development in firms; the access to external knowledge through outsourcing of NPD and the integration of knowledge developed when outsourcing activities in the NPD process. As modern products competing on increasingly international markets call for both complex and specialized knowledge, it is becoming more important to take an outward perspective of knowledge, searching for external knowledge sources, in order to be competitive. But it is also important for the firm to take an inward perspective on integration of the knowledge achieved from external sources in order to secure the knowledge gained. Outsourcing of New Product Development (NPD) refers to the outsourcing of activities for developing new products (goods and/or service), where all or the innovative part of the NPD process is purchased externally according to a contract from organizational units separate from the outsourcing firm. This means that the service to develop a whole or a part of a new product is outsourced. This definition implies that (A) the outsourced activity shall be an innovative (strongly contributing to the newness) part of the NPD process, (B) the outsourced activity was previously conducted internally, and (C) the activity shall be purchased and regulated in a contractual agreement between the organizations. Knowledge integration refers to the process of acquiring, sharing, and making use of knowledge by combining it with previous knowledge in order to create new value. Because knowledge possessed in collaborating firms is often complementary, it is important to combine it with previous knowledge in the firm. Therefore knowledge integration is chosen throughout the thesis as the term for the overall process. Based on transaction costs theory, resource based and knowledge based perspectives two major issues are investigated. First, the identification of which factors are the most important for firms when making the decision to outsource activities in theNPD process. Second, the establishment of the importance for knowledge integration of external knowledge in the firm, and to find what role level of involvement plays for efficiently achieving knowledge integration. The thesis is a compilation thesis (with six appended papers) based on findings from three quantitative studies and a longitudinal case study (presented in two of the appended papers). Using cases from and samples of medium-sized manufacturing firms with in-house NPD, it was found that while cost has been traditionally considered the most important factor for outsourcing in general, search for external knowledge is found to have a greater importance when intangible processes as NPD is object for outsourcing. It is also found that integration of thematic knowledge (product specific) is the most important type of knowledge to efficiently integrate to achieve high innovation performance and that a higher degree of involvement support knowledge integration when outsourcing activities in the NPD process.