Value co-creation in the outsourcing paradox

Abstract

WHAT OPTIMIZES INNOVATION IN OUTSOURCING, CONSIDERING THE OUTSOURCING PARADOX? How precise must be the instructions form company A to company B for an optimal result? OUTSOURCING PARADOX - A company develops the "perfect" set of tasks for their outsource manufacturer - with detailed requirements, frequencies and measures. However, micromanaging the process with precise instructions does not optimize the outcome. VALUE CO-CREATION LITERATURE - Service Dominant Logic - Optimization of innovation occurs when value is co-created between agent A and agent B, after aligning norms and institutions. Applying SDL and institutions (Vargo, Lusch, 2016) to the outsourcing process between two agents, will allow the paradox to transcend. The company's “perfect system” fails as it is not one designed by the provider of the service. By introducing a different logic to look at innovation through outsourcing managers are able to re-frame the problem in a way that shows the complementarity of the two sets of tensions and extremes into an iterative value co-creation process, after aligning norms and institutions.