Process Technology Sourcing and the Innovation Context

We employ transaction cost economics (TCE) and inspiration from technology innovation management to advance a model of technology sourcing governance and performance in the international environment. We hypothesize that the innovation context moderates the relationship between process technology sourcing and performance. The innovation context is defined as external factors reflected in the appropriability regime and whether the industry is characterized by a dominant design. Moreover, we suggest that, contingent upon the innovation context, subsidiaries prefer internal development to secure a positional advantage. A multi-industry sample of 105 subsidiaries is used to test the hypotheses. We find support for a contextual model linking process technology sourcing strategy to subsidiary performance. Motivated by TCE, we find tentative evidence for a preference order of technology sourcing beginning with internal development and ending with market sourcing, particularly when the appropriability regime is weak.