Outsourcing and Innovation: A Comparative Study of Italy and the UK

Abstract

Italy is known for bringing to the world some of the greatest inventions and arts. Indeed, creativity and innovation are not strange phrases in many Italian sectors such as fashion, automotive and leather. But challenges to achieve innovation in the Italian service outsourcing sector still lay ahead. Recent reports have highlighted the complexity involved in fostering collaborative innovation between a client firm and a supplier, often resolving is unsatisfactory results. Hence, in this report, we seek to unveil whether the long innovative tradition plays a role in its local service outsourcing industry. A study of 150 British and Italian Service Outsourcing executives was carried out to examine their comparative innovation performance and the mechanisms that support innovation in each country. The results show that Italian client firms reported more satisfaction with the quality, frequency and impact of innovation delivered by suppliers than their British counterparts. The main differences between the Italian and British cases that may explain our results were (i) Italian client firms’ strategic intent has been revolving around the objective to increase the pace of innovation within the firm while their British counterparts have been focusing on cost reduction, (ii) Italian client firms have mainly been using outcome base pricing model while British client firms have mainly been using fixed-price model and (iii) Italian client firms have been using advisory firms to a far more extent than their British counterparts. We conclude by offering a practical framework to achieve innovation through outsourcing.