Managing Intellectual Property in Global Outsourcing for Innovation Generation

The globalization of markets and business operations is a trend that will continue strongly in the coming decades. One inescapable aspect of globalization has been the trend toward global outsourcing, especially that of knowledge‐based services. Due to firms' compulsion to reduce costs in the developed world, the issue is not if a particular firm will outsource or offshore work but when it will outsource it and how effectively it will leverage outsourcing to achieve superior competitive advantage. An important implication of the outsourcing of knowledge‐based services is the management of intellectual property (IP). Managers and researchers alike are interested in understanding the effects of global outsourcing of knowledge‐based services on the management of IP. The challenge of accessing, exploiting, and defending IP in global outsourcing relationships is first examined in this paper. IP can be managed by balancing the trust and control and verification in the outsourcing relationship. Given that defending IP is a major concern for outsourcing firms, the moderating roles of multitier suppliers, supplier country legal regimes, and global supplier communities of practice on defending IP is examined in detail through moderating effect propositions. Finally, the paper examines the effect of accessing, defending, and exploiting IP in global outsourcing relationships on the generation of incremental and radical innovation for the outsourcing firm. This research tries to extend current academic research on global outsourcing in three ways. First, it offers a framework to understand the management of the buyer–seller relationship in the global outsourcing of knowledge‐based services and its relationship to the management of IP and innovation generation. Second, the framework takes a broader perspective of outsourcing and innovation generation, including globalization, tiered suppliers, supplier country legal regimes, and global supplier communities of practice on defending IP. Third the research examines the effect of accessing, exploitation, and defense of IP on generation of incremental and radical innovation for the outsourcing firm. Managerial implications of this research and future research directions are also discussed.     

Innovation generation in supply chain relationships: A conceptual model and research propositions

Innovation generation has increasingly been recognized as an outcome of interaction between a firm and various outside entities. According to this view, supplier involvement and alliances are routes to innovation generation. Despite this realization, there is a dearth of research, both conceptual and empirical, focusing on innovation generation in buyer-seller relationships in supply chains. In an attempt to fill this void, this article develops a conceptual model of innovation generation in buyer-seller relationships in upstream supply chains. The authors propose that innovation generation in supply chain relationships, both incremental and radical, is a consequence of interactions between buyers and sellers. They also delineate factors internal and external to the relationship that moderate the link between interaction and innovation generation. Finally, the authors discuss managerial implications of their research and offer guidelines for future empirical research. Subroto Roy (sroy@newhaven.edu) (Ph.D., University of Western Sydney, 2002) is an assistant professor of marketing and international business at the University of New Haven since 2001. Prior to his Ph.D., he had more than 12 years of experience in packaging industry (Tetra Pak) marketing and sales. Involved with several upstream industrial new product development projects he helped clients launch more than 100 brands. Current research interests include global supply chains, technology adoption, and knowledge outsourcing. His work has appeared inAmerican Marketing Association Educators Conferences and is forthcoming inIndustrial Marketing Management, among others. He is a co-guest editor of a special issue of theJournal of Business and Industrial Marketing and has consulted with leading companies in Australia and Asia. See http://www.newhaven.edu/faculty/roy. K. Sivakumar (k.sivakumar@lehigh.edu) (Ph.D., Syracuse University, 1992) is the Arthur Tauck Professor of International Marketing & Logistics and a professor of marketing at Lehigh University. His research interests include pricing, global marketing, innovation management, and supply/value chain management. His research has been published in theJournal of the Academy of Marketing Science, theJournal of Marketing, theJournal of International Business Studies, Marketing Letters, theJournal of Business Research, International Marketing Review, Pricing Strategy & Practice: An International Journal, and other publications. He has won several awards for research. He is on the editorial board of six journals. Home page: www.lehigh.edu/~kasg. Ian F. Wilkinson (i.wilkinson@unsw.edu.au) is a professor in the School of Marketing at the University of New South Wales since 2001. His current research focuses on interfirm relations and networks in domestic and international markets and the dynamics and evolution of markets, including applications of complexity theory. His research has appeared in many journals including theJournal of the Academy of Marketing Science, theJournal of Business Research, theJournal of World Business, theJournal of International Marketing, theEuropean Journal of Marketing, Industrial Marketing Management, theJournal of Industrial and Business Marketing, and theJournal of Applied Psychology. He is on the editorial board of 12 scholarly journals. See http://www.marketing.unsw.edu.au/PEOPLE/HTML/IWilkinson.html.     

OK you are now an approved supplier—but you still do not get orders: Understanding the case of the P-Card

The purchase card (P-Card) was introduced in the 1990s as a payment mechanism for smaller value items so that purchase paperwork is reduced, itemized reporting and control become possible, and purchasing and payment are decentralized at the user level. Since the late 1990s, with E-procurement and B-to-B E-commerce, the possibilities of P-Card use have magnified exponentially. However, the adoption and success of P-Cards in organizations has been short of initial expectations.Using P-Cards with approved suppliers is an ideal situation for both buyers and sellers. In practice however, many P-Card users seem to buy many items from suppliers who are not on the approved supplier list. To make payments to these “new” suppliers, organizations need to make exceptions resulting in paperwork, costs, and loss of business for approved suppliers. However, there are many P-Card users who indeed follow the company-approved list and these users may be called “P-Card conforming users.”This article takes a knowledge-based approach and presents a model for conforming P-Card use (CPU). The model is tested in an organization, and results are used to derive managerial and research implications. While orientation training of P-Card users is important, both business marketers and purchasing departments need to reach out directly to the P-Card user to ensure that approved supplier lists work well in an electronic age.     

Recollections of my Career

Subroto, Professor at the Faculty of Economics, University of Indonesia (FEUI), is one of the architects of the economic policies that brought growing prosperity to Indonesia over the New Order years Educated in Dutch colonial and Japanese occupation schools, he joined Indonesia's independence struggle, and later studied economics at FEUI, McGill University, MIT, and Stanford and Harvard Universities. He taught international economics and business cycles at FEUI and was Secretary of the Faculty. With Widjojo Nitisastro, Mohammad Sadh, Ali Wardhana and Emil Salim, Subroto was appointed a Personal Economic Adviser to General (later President) Soeharto's new government in 1966 In 1968 he joined the Department of Trade, and later was minister of departments responsible for transmigration, cooperatives, mining and energy. After a 17-year ministerial career serving in four consecutive cabinets, Subroto was Secretary General of OPEC for six years from 1988 He remains active in Indonesia's nongovernmental Indonesian Institute for Energy Economics (IIEE), writing on energy problems, and is also Rector of the private Pancasila University in South Jakarta As part of our occasional series of interviews with economists who have helped shape New Order Indonesia, Professor Subroto talked with Chris Manning and Thee Kian VVie of the Bulletin's Editorial Board about his experience as a cabinet minister and as Secretary General of OPEC, and about his views on Indonesia's economic development, particularly its energy problems.     

Innovation generation in upstream and downstream business relationships

The purpose of this article is to examine the phenomenon of innovation generation in a firm's upstream and downstream business relationships. The study considers the role of knowledge redundancy and relational embeddedness on the generation of radical and incremental innovations. The study further considers the moderating role of complexity and globalization on the link between the independent variables and innovation generation. By deriving several theoretically sound and managerially useful propositions, this research advances knowledge in the business-to-business and innovation generation domains and offers insights for managerial practice.     

Global Outsourcing Relationships and Innovation: A Conceptual Framework and Research Propositions

Increasing globalization and the rapid growth of information technologies, including the Internet, have resulted in drastic changes in international activities of companies. Once limited to manufactured goods, currently, global outsourcing encompasses a wide variety of knowledge‐based services, such as accounting, financial services, taxation, customer service, information technology, engineering drawings, human resources, research and development (R&D), data processing, and sales. The domain of outsourcing knowledge‐based services is the focus of this paper. Moving beyond the inevitability of global outsourcing, this research takes the perspective of the outsourcer and focuses on managing its transition to providers in the context of innovation. In addition to delivering projected cost benefits to outsourcers, effective transition management can facilitate the generation of innovations. This research attempts to extend the current academic research on global outsourcing in three ways: (1) It offers a framework for understanding the transition process in outsourcing and its relationship to innovation; (2) it takes a broader perspective of outsourcing, including globalization, knowledge‐based services, and core activities of the firm; and (3) using a parsimonious set of theoretical concepts based on control theory, it develops several research propositions to clarify the linkages between variables. Based on our theorizing, outsourcing top management should ask two questions when planning outsourcing of knowledge‐based services to generate innovations in a globalized world. These two questions are: (1) How close is the task to our core competence? And (2) how much tacit knowledge is involved in doing the outsourced task? Next, managers must identify global providers and then spend considerable thought in operational execution of the transition of the task for that is the only time that both complete teams will work together. For tasks that are close to core competence, rigid‐explicit behavioral controls should be put in place; however, for tasks that have high tacit knowledge content, high norms‐based relational control would be more effective. These different types of controls would lead to different innovation outcomes. Rigid‐explicit behavioral controls would produce incremental innovation while relational norms‐based controls would encourage radical innovation.     

Global innovation generation and financial performance in business-to-business relationships: the case of cross-border alliances in the pharmaceutical industry

The past few decades have witnessed a significant increase in the number of cross-border strategic alliances among firms. We focus on the role of alliance expertise (alliance experience and diversity of partners) and alliance governance (horizontal vs. vertical alliances and joint venture vs. other alliances) in global innovation generation. We also examine the effect of these variables on the financial performance of the focal firm. The conceptual model is tested using an empirical analysis of cross-border alliances formed by U.S. pharmaceutical companies from 1985 to 2008. We find that while prior alliance experience has a positive association with global innovation generation, diversity of partners has a negative relationship. In addition, whether the alliance is horizontal or vertical has no bearing on the innovation generation, but joint ventures are associated with more global innovation generation than other types of alliances. Finally, as global innovation generation increases, financial performance increases up to a point but thereafter exhibits a negative relationship.