Thursday, April 18, 2013

In Harsh - and Slack Times: How Does Firm Performance Affect the Intensity and the Direction of External Technology Sourcing?

Read the working paper
INSEAD Working Paper 2013/49/ST

Despite our understanding of the importance of external technology sourcing, we know little about what leads firms to become more open to sourcing external technologies. To elucidate this question, we draw upon the behavioral theory of the firm, and propose that sourcing external technologies is sensitive to how managers evaluate organizational performance relative to aspirations. We develop several propositions linking whether a firm is in "harsh times" —i.e. performing below its aspiration level—or in "slack times" —i.e. performing above its aspiration level—to both the intensity and the direction of its search for external technologies. This paper not only sheds light into how performance affects a firm’s search for external technologies, but also reveals important boundary conditions that influence how a firm manages its broader set of R&D activities.