We build on systems integration literature to explain how and why knowledge integration of non-modular products is based on a strategic choice between internalizing and outsourcing core R&D. The under-researched choice of outsourcing core R&D on an on-going basis appears to face risks of higher transactions costs and loss of control. We illuminate these choices in a comparative analysis of two longitudinal cases that compare an internally focused R&D intensive firm and an externally focused R&D intensive firm; and we show how the externally focused approach can avoid risks by framing non-modular outsourcing as modular even though it is not so and by engaging in a social process of communication to achieve a common agreement between partners concerning the direction of efforts and thus effectively reduce highly iterative knowledge exchange between modules. Our findings add to our understanding of the systems integration literature; the nature of firm product system strategies, as well as firm boundaries in a knowledge economy.
Product systems; R&D outsourcing; Knowledge integration; Product systems capability; Inter-firm coordination mechanisms; Biotechnology
Citation: Dzidziso Samuel Kamuriwo, Charles Baden-Fuller Knowledge integration using product R&D outsourcing in biotechnology doi:10.1016/j.respol.2016.02.009
Received 11 November 2012, Revised 15 February 2016, Accepted 26 February 2016, Available online 14 March 2016
Copyright: ©2016 The Authors. Published by Elsevier B.V. This is an open access article under the CCBY license(http://creativecommons.org/licenses/by/4.0/)
We are grateful for the support from the EPSRC grant EP/E037208/1 on Financial and Organizational Innovation in Biotechnology and the EPSRC grant EP/K039695/1 on Building Better Business Models. We benefited from helpful and extensive discussions with colleagues at Cass Business School and Sussex University (SPRU), as well as at AOM, SMS and EGOS conferences, and particularly Hans Frankort, Santi Furnari, Michael Hopkins, Vincent Mangematin, Paul Nightingale, Davide Ravasi, Joanne J. Zhang and the late John Pool as well as three anonymous reviewers and the editor Ed Steinmueller of this journal. The views expressed in this article, errors, and omissions are our own.