The Path of Offshore Outsourcing Innovation to International Expansion: The Real-Options View

In this study, we explore two research questions: Why do firms adopt offshore outsourcing to conduct offshoring innovation under uncertainty? How do firms strategically respond to their choices over time? Drawing upon the perspective of real options, we argue that firms will be more likely to adopt the governance mode of offshore outsourcing for offshoring innovation when environmental uncertainty increases. In addition, a firm's experience in offshoring innovation can negatively moderate the main effect of environmental uncertainty on the likelihood of adopting offshore outsourcing to conduct offshoring innovation. Moreover, the increase in a firm's learning scope stemming from offshore outsourcing is more likely to lead to future expansion of offshoring innovation. Using the data from Offshoring Research Network, we find the central premises of this study validated and supported.