Achieving Business Process and Strategic Innovation via Vendor Ecosystems: A QCA Approach

Client firms face a paradoxical tension when attempting to achieve innovation through outsourcing. Standardized strategies reduce outsourcing risk but tend to hinder innovation. Flexibility in design improves innovation, but increases the risks associated with outsourcing. Current research on innovation through outsourcing sheds little light on how such a paradox can be resolved. Drawing on logics anchored in Transaction Cost Economics (TCE) and Resource Dependence Theory (RDT), and by adopting a configurational approach, we show that in vendor innovation eco-systems (VIEs), business process and strategic innovation through outsourcing can be achieved through a range of combinations available for the client firms that represent a varying degree of trade-offs between innovation and outsourcing risks.