When to Give up Control of Outsourced New Product Development

Abstract

The author investigates the impact of client control on supplier task performance in the burgeoning area of outsourced new product development. In relationships in which the outsourced task requires a high degree of creativity on the part of the supplier, ex ante contractual control is shown to increase supplier performance. In contrast, ex post client control is shown to reduce supplier performance, though certain highly skilled clients can overcome this effect. Behaviorally, clients exercise less control both ex ante and ex post in relationships in which the outsourced task requires a high degree of creativity on the part of the supplier. Managerially, the results suggest that clients should use more ex ante control to govern highly creative tasks. In general, clients should use less ex post control over such tasks, though highly skilled clients can actually benefit from using greater control.

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