Contracting for collaborative Innovation in Outsourcing Relationships: Identifying the role of client and vendor

Abstract

Achieving innovation has become an essential topic within every firm. It has been witnessed that outsourcing firms in particular aim for innovation from their external vendors in recent years. This is driving the vendors to improve their business services to deliver value to their clients and remain competitive on the increasing market. Many academic papers have analysed how innovation can be achieved from an outsourcing arrangement. Several frameworks and best practices were evolved to support client and vendor firms increasing the possibility to receive and deliver best innovative solutions that allow a sustainable win-win relationship. However, the innovation process from outsourcing faces many challenges and is not matured. A precise definition of innovation and its governance is very often not given. Additionally, the interaction between contracting for innovation and outsourcing was not yet completely discovered (Oshri & Zimmermann, 2015). This paper aims to unveil the factors that are necessary to include in an outsourcing contract to foster innovation and accomplish value within such a relationship. In order to achieve this, the Innovation Ladder Framework and the 14 clauses recommended by Lacity and Willcocks were taken into consideration. The leading challenge in this paper is introduce a framework that propose the right contract form to the respective innovation type.