Toward Higher Innovation Performance: A Comparative Study on In-house and Outsourced Manufacturing Companies

Henrik Lykke Hungeberg & Shanice Kahanap Abalos

Student thesis: Diploma thesis

Abstract

As the demands in the market are ever-changing, manufacturers must reconsider their position in a given industry with the chosen globalization strategy, including the location of the actual production. The strategic decision for pursuing outsourcing has mostly been in order to achieve lower operational costs. In addition, outsourcing has been thought of as being a trade-off between cost reduction and improvement of innovation capabilities. However, many companies have turned to insourcing in the recent years in order to have their manufacturing processes closer to market and customers as well asto enhance flexibility during the product development, and thus more capable of organizing for innovation.
The purpose of this study is to shed a light on how the manufacturing location may influence the overall innovation performance of a company. We analyze the differences between companies that have chosen to outsource their production and companies that have kept these processes in-house. In addition, we discuss which other factors may have an impact on the company’s innovation performance other than the manufacturing location. We employ an inductive research design, which consists of interviews with six companies that are placed within one of the two groups as the primary data.
This paper contributes with valuable insights into some companies’ decision-making on globalization strategies and organizing for innovation, which has mostly been based on assumptions beforehand. Our findings propose that there is no overwhelmingly clear indication that the innovation performance is higher in either the in-house or the outsourced manufacturing companies, but it is rather dependent on multiple factors. We recommend for the companies and their management to consider implementing a measure for innovation performance to support strategic decisions and risk management.

EducationsGraduate Diploma in Innovation Management, (Diploma Programme) Final Thesis
LanguageEnglish
Publication date2019
Number of pages78
SupervisorsStefan Meisiek