This thesis deals with two aspects of knowledge needed for new product development; theaccess to external knowledge through outsourcing of NPD and the integration of knowledgedeveloped when outsourcing activities in the NPD process. As modern products competing onincreasingly international markets call for both complex and specialized knowledge, it isbecoming more important to take an outward perspective of knowledge, searching for externalknowledge sources, in order to be competitive. But it is also important for the firm to take aninward perspective on integration of the knowledge achieved from external sources in order tosecure the knowledge gained.

Outsourcing of New Product Development (NPD) refers to the outsourcing of activities fordeveloping new products (goods and/or service), where all or the innovative part of the NPDprocess is purchased externally according to a contract from organizational units separatefrom the outsourcing firm. This means that the service to develop a whole or a part of a newproduct is outsourced. This definition implies that (A) the outsourced activity shall be aninnovative (strongly contributing to the newness) part of the NPD process, (B) the outsourcedactivity was previously conducted internally, and (C) the activity shall be purchased andregulated in a contractual agreement between the organizations.

Knowledge integration refers to the process of acquiring, sharing, and making use ofknowledge by combining it with previous knowledge in order to create new value. Becauseknowledge possessed in collaborating firms is often complementary, it is important tocombine it with previous knowledge in the firm. Therefore knowledge integration is chosenthroughout the thesis as the term for the overall process.

Based on transaction costs theory, resource based and knowledge based perspectives twomajor issues are investigated. First, the identification of which factors are the most importantfor firms when making the decision to outsource activities in the NPD process. Second, theestablishment of the importance for knowledge integration of external knowledge in the firm,and to find what role level of involvement among staff plays for efficiently achievingknowledge integration.

The thesis is a compilation thesis (with six appended papers) based on findings from threequantitative studies and a longitudinal case study (presented in two of the appended papers).Using cases from and samples of medium-sized manufacturing firms with in-house NPD itwas found that, while cost has been traditionally considered the most important factor foroutsourcing in general, search for external knowledge is found to have a greater importancewhen intangible processes as NPD is object for outsourcing. It is also found that thematicknowledge is the most important type of knowledge to efficiently integrate to achieve highinnovation performance and that a higher degree of processes and culture supportinginvolvement, increase knowledge integration when outsourcing activities in the NPD process.

The focus of this thesis is the outsourcing of activities in the New Product Development (NPD) process. Outsourcing of NPD refers to the outsourcing of development activities for the developing of new products (goods and/or service), where all or just the innovative part of the NPD process is purchased externally based on a contract with organizational units separate from the outsourcing firm. This definition implies that (A) the activity should be an innovative part of the NPD process, (B) the activity should have previously been conducted internally, and (C) the activity should be purchased under a contractual agreement between the organizations.

This thesis focuses on the outsourcing of NPD in medium sized firms. Although the framework is probably also useful for small and large firms, the three empirical studies in the thesis explored samples of medium sized firms. NPD is a knowledge intensive activity that requires the ability to handle uncertainties and is very dependent on the individuals involved in the process. In this way it differs from production, which (especially when producing standard items on a large scale) is easier to control, monitor and to evaluate the costs. Therefore, some considerations connected to knowledge acquisition and uncertainty needs to be addressed.

A literature review reveals that research on outsourcing often focuses on A) Large firms and B) outsourcing of production activities. In addition, research on NPD usually involves large firms, despite the fact that the interest in product development in small and medium sized firms has grown rapidly in recent years. Since outsourcing of NPD is a method frequently used to access competence, and reduce costs and/or uncertainty, it seems motivated to study the outsourcing of NPD in medium sized firms.

The thesis presents a decision framework that is based on three empirical studies (two survey studies and one case study) and a theoretical framework. The theoretical framework presented in the thesis is commonly used to understand outsourcing questions in general. In the present thesis the framework is applied in the specific situation of outsourcing a knowledge intensive activity (such as NPD) in the context of medium sized firms. Transactions cost, resource based, resource dependency, knowledge based, agency cost, and institutional theories are revisited in the thesis.

Outsourcing can lead to advantages in form of lower costs, access to knowledge or other resources, as well as access to markets, but it can also result in a knowledge drain, lower motivation among in-house staff, or an increased level of dependency on external organizations. Therefore the decision to outsource is not always a good one, and the pros and cons must be carefully evaluated. The result of the thesis is a decision framework that maps factors affecting the decisions that need to be made when outsourcing NPD. The implications can be of value to the outsourcing firm as well as to the potential outsourcing partner. The framework has been presented to the firms in the studies and thus has already proved its value to some extent.

The framework will also be used for the design of the studies that will hopefully take me towards my PhD degree, including a new survey study as well as a case study focusing on knowledge integration.