Are In-House and Outsourcing Innovation Strategies Correlated? Evidence from the European Agri-Food Sector

We analyse European agri-food firms’ choices about innovation in-house or through outsourcing and provide empirical evidence about the correlation between these strategies. The relationship between the innovation strategy and firm-, industry- and innovation-specific characteristics is analysed through a bivariate probit model, which uses firm data from the EFIGE Bruegel-UniCredit dataset. Transaction cost, resource base and knowledge governance arguments are used to explain the choice of innovation strategy. Our results show that the decisions to innovate in-house or through outsourcing are independent from each other. In addition, we find that several organisational characteristics such as communication systems, human resource practices and specialisation are likely to influence both strategies. Conversely, organisational characteristics such as the allocation of authority and the business network do not seem relevant in determining the innovation strategies of the European agri-food sector.