When is it favourable to outsource innovation

Abstract: Companies need to constantly innovate and improve in order to remain profitable and keep up with competition. But innovation can be costly and knowledge and new ideas hard to find. Therefore companies outsource innovation and do so increasingly even though it is difficult to successfully decide when and how. When should companies try to come up with new ideas themselves, and when should they give the job to outside experts? Does outsourcing of innovation work in established markets, new markets, for incremental or disruptive innovations, for product or process types of innovations? Research involving small companies and outsourcing of innovation has not been widely addressed in the literature, this thesis intend to give a better understanding of this area. After conducting a literature review we went looking for specific answers to the questions what effect does the business newness and size of a company have on the success of outsourcing and is there a difference in the outcome of outsourcing of innovation regarding the areas product, process, market and organization. A survey among decision makers and decision influencers showed: 1. Outsourcing of product and market innovation in new business compared to established business was considered equally successful. 2. Outsourcing of process and organisation innovation in new business was considered significantly less successful compared to established business. 3. The perceived benefit from outsourcing product innovation is higher than perceived benefit from outsourcing of processes, markets or organizations innovation. 4. Market leaders (including those who were runner up) believes that outsourcing of organization innovation in established business is more successful compared to none market leaders same goes for outsourcing of process innovation. This thesis tries to explain these and other findings concerning outsourcing of innovation.