Abstract

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.

Publication Type:	Article
Additional Information:	© 2016 Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/
Publisher Keywords:	Product systems; R&D outsourcing; Knowledge integration; Product systems capability; Inter-firm coordination mechanisms; Biotechnology
Departments:	Cass Business School
URI:	http://openaccess.city.ac.uk/id/eprint/13987

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