Technology Development Outsourcing: When to Join Forces With a Rival?

ABSTRACT Knowing the challenges of collaborating with a competitor in developing new technologies, firms sometimes still choose a competitor instead of a noncompeting technology provider. To explore why, this study adopts an inter‐organizational trust view to explain the formation of a technology development outsourcing relationship. Using a vignette‐based experiment with procurement managers, results show how three product‐ and competitor‐related factors: product newness, competitor market size, and product substitutability, affect a purchasing manager's intention to choose a competitor. The post hoc analysis confirms the two sources of inter‐organizational trust, competence and integrity, in explaining the influences of the three factors. Using results from two waves of interviews, a behavioral experiment and a rational agent math model, this study explains competitor selection behaviors in a triadic context with a noncompeting provider as the default option. Contributing to the interface of technology outsourcing, co‐opetition in innovation, and supplier selection literature, these findings can help managers assess product and competitor attributes in deciding whether to collaborate with a competitor in a technology development outsourcing context.