Technology Development Outsourcing: When to Join Forces With a Rival?

Abstract

Knowing the challenges of collaborating with a competitor in developing new technologies, firms sometimes still choose a competitor instead of a noncompeting technology provider. To explore why, this study adopts an inter-organizational trust view to explain the formation of a technology development outsourcing relationship. Using a vignette-based experiment with procurement managers, results show how three product- and competitor-related factors: product newness, competitor market size, and product substitutability, affect a purchasing manager's intention to choose a competitor. The post hoc analysis confirms the two sources of inter-organizational trust, competence and integrity, in explaining the influences of the three factors. Using results from two waves of interviews, a behavioral experiment and a rational agent math model, this study explains competitor selection behaviors in a triadic context with a noncompeting provider as the default option. Contributing to the interface of technology outsourcing, co-opetition in innovation, and supplier selection literature, these findings can help managers assess product and competitor attributes in deciding whether to collaborate with a competitor in a technology development outsourcing context.