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Technology outsourcing in manufacturing small‐ and medium‐sized firms: another competitive resource?
Author(s) -
O'Regan Nicholas,
Kling Gerhard
Publication year - 2011
Publication title -
randd management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.253
H-Index - 102
eISSN - 1467-9310
pISSN - 0033-6807
DOI - 10.1111/j.1467-9310.2010.00626.x
Subject(s) - profitability index , outsourcing , business , investment (military) , industrial organization , knowledge process outsourcing , revenue , product (mathematics) , commerce , business administration , finance , marketing , geometry , mathematics , politics , political science , law
Based on a sample of UK manufacturing small‐ and medium‐sized firms in the engineering and electronics industry, the study identifies firm‐ and industry‐specific factors that stimulate R&D outsourcing and assesses the impact of R&D investment and outsourcing on firms' profitability. The findings indicate that (1) R&D investment fosters profitability, (2) firms with a lower turnover spend less on R&D, (3) current R&D does not explain innovation measured by revenues from new products and patents, (4) smaller firms with lower R&D investment levels tend to outsource R&D and (5) outsourcing is not inferior in terms of product innovation. Hence, outsourcing can enhance profitability – albeit the benefit of outsourcing decreases with firm size. Managers of small firms should consider outsourcing R&D, as this can reduce R&D expenditure and lead to the more effective use of resources as well as achieving a similar degree of product innovation with resultant increases in profitability.