Governance decisions for the offshore outsourcing of new product development in technology intensive markets David A. Griffith a, *, Nukhet Harmancioglu b,1 , Cornelia Droge c,2 a Department of Marketing, Eli Broad College of Business, Michigan State University, N370 Business Complex, East Lansing, MI 48824, United States b College of Administrative Sciences and Economics Koc University Sariyer, Istanbul, 34450 Turkey c Department of Marketing, Eli Broad College of Business, Michigan State University, N324 Business Complex, East Lansing, MI 48824, United States 1. Introduction The study of globalized, rapidly changing technology- intensive (TI) markets has attracted research attention in the marketing, management and international business disciplines (John, Weiss, & Dutta, 1999; Matthews & Cho, 1999; Stremersch, Allen, Benedict, & Ruud, 2003). TI markets are characterized by uncertainty due to hetero- geneous and rapidly changing technologies, and by the fact that buyers frequently lack relevant prior experience. To survive, firms increasingly build new product develop- ment (NPD) capabilities and achieve strategic flexibility by outsourcing and building close supplier relationships in offshore markets (Carson, 2007; Kotabe & Murray, 1990; Yalcinkaya, Calantone, & Griffith, 2007). For example, IBM, Accenture, Electronic Data Systems, Computer Sciences Corp. and HP all recently signed global sourcing contracts exceeding $1 billion in value; growing foreign companies, such as TCS, Infosys and Wipro, are rising in the top 10 supplier ranks (12 July 2006 in The Wall Street Journal; 28 December 2007 in Business Wire). Offshore outsourcing creates avenues for inter-firm learning and provides for global leverage. Building NPD partnerships with offshore suppliers provides buyer firms with substantial advantages, such as the ability to increase product variety, decrease necessary NPD resources and costs required to bring new products to market, and speed up the introduction of innovative products. Partnering with offshore suppliers, however, can also create supplier– buyer dependence, risks of leakage of tacit know-how, and loss of knowledge-based capabilities (Heide & Weiss, 1995; Stremersch et al., 2003). Dependence on suppliers for product design may put intellectual property (IP) in jeopardy, casting doubt on how much intellectual property the firm really owns. This threat increases when collabor- ating on a global scale due to differences in IP protection Journal of World Business 44 (2009) 217–224 ARTICLE INFO Keywords: Governance Offshoring Outsourcing New product development Technology intensive markets ABSTRACT This study addresses how buyers organize their offshore outsourcing new product development relationships. Building on transaction cost economics and resource dependence theories, we propose a model of the influence of key new product development offshore outsourcing factors on two important buyers’ governance decisions (i.e., supply concentration and degree of supplier involvement). The antecedents, drawn from the marketing, management, and international business literatures, include: three sources of asset specificity (degree of modularity, strategic value of the project, and technology specificity) and two sources of uncertainty (cultural distance and technological discontinuity). The results, derived from an analysis of 200 offshore outsourcing new product development relationships, provide new insights for academics and practitioners. ß 2008 Elsevier Inc. All rights reserved. * Corresponding author. Tel.: +1 517 432 6429. E-mail addresses: griffith@bus.msu.edu (D.A. Griffith), nukheth@bilkent.edu.tr (N. Harmancioglu), droge@bus.msu.edu (C. Droge). 1 Tel.: +90 312 290 2926. 2 Tel.: +1 517 432 6405. Contents lists available at ScienceDirect Journal of World Business journal homepage: www.elsevier.com/locate/jwb 1090-9516/$ – see front matter ß 2008 Elsevier Inc. All rights reserved. doi:10.1016/j.jwb.2008.08.007