PRODUCT INNOVATION BY SMALL AND MEDIUM-SIZED FIRMS THROUGH OUTSOURCING AND COLLABORATION

Abstract

This paper assesses the role of outsourcing and inter-firm collaboration to product innovation in Western New York’s small and medium-sized firms (SMFs). Results of an exploratory survey of 100 small and medium-sized manufacturing firms are presented. A major finding of the paper suggests that SMFs are involved in external collaboration to support new product development. A large majority of these firms collaborate with networks of external partners for their core and non-core activities. A collaborative relationship with external entities was hypothesized to support product innovation; however this was not confirmed by the survey results. The results also indicate that in comparison to the levels ten years ago, outsourcing by SMF increased in all five categories of Research and Development (R&D), product development, manufacturing, marketing/sales, and distribution. Comparatively, medium-sized firms tend to outsource non-core activities while smaller firms tend to outsource their core organizational competencies.