What happens when you outsource too much?

MIT Sloan Management Review

Volumn 52, Issue 2, 2011, Pages 59-64

  Zirpoli, Francesco ^a   Becker, Markus C ^b  

^a CA' FOSCARI UNIVERSITY OF VENICE   (Italy)

^b UNIVERSITY OF SOUTHERN DENMARK   (Denmark)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 79952329621     PISSN: 15329194     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (16)

1. A. Takeishi, "Bridging Inter-and Intra-Firm Boundaries: Management of Supplier Involvement in Automobile Product Development", Strategic Management Journal 22, no. 5(2001):403-433. (Pubitemid 33608234)
2. The insight into the essential role of component-specific knowledge to design larger systems has been a central finding of research in the automotive industry. Interestingly, the same conclusion was also reached by research on innovation in the comic book industry. In this industry, Taylor and Greve found that combining knowledge requires a deep understanding of knowledge, rather than just information scanning or exposure. Their research hints at a reason why shadow engineering, listening posts and the monitoring of technological advances might not be sufficient to maintain component-specific knowledge at the cutting edge.
3. See A. Takeishi, "Knowledge Partitioning in the Interfirm Division of Labor: The Case of Automotive Product Development", Organization Science 13, no. 3(2002):321-338;
4. Takeishi, "Bridging Inter-and Intra-Firm Boundaries";
5. and A. Taylor and H. Greve, "Superman or the Fantastic Four? Knowledge Combination and Experience in Innovative Teams", Academy of Management Journal 49, no. 4(2006):723-740. (Pubitemid 44453116)
6. Takeishi, "Knowledge Partitioning."
7. R. Lamming, "Beyond Partnership" (London: Prentice Hall Europe, 1993);
8. and W. M. Cohen and D. A. Levinthal, "Absorptive Capacity: A New Perspective on Learning and Innovation", Administrative Science Quarterly 35, no. 1(1990):128-152.
9. Prior research has identified a further criterion that companies should consider in making decisions about what to keep. It has to do with technological "newness", and it is especially important in technologically advanced areas where product performance integration is complex and where product architecture and company boundaries influence each other. In these situations (for example, products using new powertrains), having a higher level of component-specific knowledge can be strategically vital. Toyota Motor Corp. 's success at leveraging its hybrid electric and gas engines in its Prius and other models offers a good example.
10. See Takeishi, "Knowledge Partitioning";
11. and S. K. Fixson, Y. Ro and J. K. Liker, "Modularisation and Outsourcing: Who Drives Whom? A Study of Generational Sequences in the U. S. Automotive Cockpit Industry", International Journal of Automotive Technology and Management 5, no. 2(2005):166-183. (Pubitemid 40929709)
12. G. Gavetti and D. Levinthal, "Looking Forward and Looking Backward: Cognitive and Experiential Search", Administrative Science Quarterly 45, no. 1(2000):113-137;
13. and G. P. Pisano, "Knowledge, Integration, and the Locus of Learning: An Empirical Analysis of Process Development", Strategic Management Journal 15, no. S1 (1994):85-100.
14. In response to the challenges, Alpha managers began to seek out ways to back away from their black-box sourcing strategy. They did this in part by increasing the number of inside people with skills such as virtual simulation that were considered important for pre-development. These skills were seen to enhance efficiency in pre-development activities by allowing engineers to represent performance without having to build expensive prototypes.
15. S. Brusoni and A. Prencipe, "Making Design Rules: A Multidomain Perspective", Organization Science 17, no. 2(2006):179-189. (Pubitemid 43515282)
16. S. Thomke and T. Fujimoto, "The Effect of 'Front-Loading' Problem-Solving on Product Development Performance", Journal of Product Innovation Management 17, no. 2(2000):128-142. (Pubitemid 30572158)