Oanh T. K. Tran

Outsourcing has become one of the buzzwords in managerial practice today. Many authors have introduced different frameworks in order to help practitioners making outsourcing decisions. Although these frameworks were developed based on different theories such as transaction cost theory, resource-based theory, real option theory, and institutional theory, their common recommendation was that innovation should not be outsourced. Interestingly, outsourcing of innovation has increasingly become a commonly global practice among different sectors. These reveal a gap between academic studies on outsourcing and current outsourcing practices. An important responsibility of academic researchers is to make sure literature being up-to-date and insightful. In this research, the author investigates three issues: (1) the drivers of outsourced innovation, (2) the channels that firms use to achieve innovation, and (3) the results of outsourcing of innovation. The author argues that in today global business conditions firms should make decisions regarding outsourcing of innovation based on knowledge-based and absorptive capacity approaches. The author also proposes a framework for outsourcing of innovation decision making. Finally, implications are discussed for managerial practices.