Strategic Management Journal Strat. Mgmt. J., 33: 1480–1498 (2012) Published online EarlyView in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/smj.1983 Received 17 December 2009; Final revision received 28 March 2012 OFFSHORING AND FIRM INNOVATION: THE MODERATING ROLE OF TOP MANAGEMENT TEAM ATTRIBUTES OLI R. MIHALACHE,* JUSTIN J. J. P. JANSEN, FRANS A. J. VAN DEN BOSCH, and HENK W. VOLBERDA Rotterdam School of Management, Erasmus University, Rotterdam, the Netherlands This study attempts to increase the understanding of how offshoring influences the introduction of new products and services. Focusing on the offshoring of those business functions that provide direct knowledge inputs for innovation (i.e., production, R&D, and engineering), we propose that offshoring has an inverted U-shaped influence on firm innovativeness. Additionally, we provide an upper echelon contingency perspective by considering the moderating role of two top management team (TMT) attributes (i.e., informational diversity and shared vision). Using a cross-industry sample with lagged data, we find that offshoring has an inverted U-shaped influence on firm innovativeness and that this relationship is steeper in firms with high TMT informational diversity and in firms with low TMT shared vision. Copyright  2012 John Wiley & Sons, Ltd. INTRODUCTION Ample research emphasizes the positive conse- quences of innovation for firm performance and considers it central to firms’ competitive advan- tage (e.g., Dutta, Narasimhan, and Rajiv, 2005; Hall, 2000; Geroski, Machin, and Van Reenen, 1993). However, introducing new products and services is challenging because it requires sub- stantial new knowledge and financial resources (Sampson, 2007). Highlighted as creating ‘new platforms for knowledge creation and innovation,’ offshoring has been suggested to provide fertile ground for firms to accumulate knowledge and increase their innovativeness (Kenney, Massini, and Murtha, 2009: 887). Offshoring refers to the assignment of business functions to locations outside of the firm’s national Keywords: firm innovation; offshoring; top management teams; TMT informational diversity; TMT shared vision ∗ Correspondence to: Oli R. Mihalache, Rotterdam School of Management, Erasmus University, Burgemeester Oudlaan 50, 3062 PA Rotterdam, the Netherlands. E-mail: oli.mihalache@gmail.com borders in support of domestic rather than foreign business operations (Kenney et al., 2009; Levy, 2005; Lewin, Massini, and Peeters, 2009). Due to recent advances in information technology (IT) and trade liberalization, offshoring is experiencing intensive growth. For instance, the number of off- shore service workers grew from less than 35,000 worldwide in 1994 to over 350,000 in India alone in 2003 (Metters and Verma, 2008). This growing trend is expected to continue with estimates that between the years 2000 and 2015, over 3 million white-collar jobs worth more than US$150 billion annually will be moved from the United States to offshore locations (McCarthy et al., 2002). In addition to its overall magnitude, offshoring is also growing in terms of the variety of functions that firms relocate abroad, as firms start to offshore functions rich in product-related knowledge such as research and development (R&D) (Lewin and Peeters, 2006). These developments have led some authors to consider offshoring ‘the most important phenomenon transforming the workplace’ (Young- dahl and Ramaswamy, 2008: 213). Copyright  2012 John Wiley & Sons, Ltd.