The Trend Toward Outsourcing in New Product Development: Case Studies in Six Firms

In the constant drive for higher quality, lower cost, and faster-to-market products, many firms have begun to learn "how not to make things" — how to give some tasks to other firms who could make more efficiently. Examples from industries highlight the trend. Case studies were conducted in six firms and many insightful comments from prominent managers are incorporated. The case studies reveal a trend toward outsourcing some tasks in new product development. We use the transaction cost theory and the resource-based theory to explain the trend of outsourcing. This kind of outsourcing allows the firm to focus on core tasks and access resources and capabilities not available or not easily developed internally. NPD program performance can be greatly enhanced, and the R&D department can move away from routine administration toward a more strategic role. Many implications for managers are offered, and theoretical contributions are discussed.