Strategic outsourcing of R&D: an exploratory study of human resources management practices of Indian outsource firms

Outsourcing as a phenomenon makes the news almost regularly, as more firms announce plans to move jobs to low-wage countries. But, it has been going on for at least two decades and the recent trend towards outsourcing of R&D work leads to a number of problems, the most important of which appears to be related to human resources aspects. R&D outsourcing, if not properly managed, could have serious consequences for both outsourcer and outsource firms. We have little understanding of the phenomenon other than that thus far, it appears to be successful, prompting more firms to embrace outsourcing. The central question of this study is: what are the consequences of R&D outsourcing on HRM practices in outsource firms, and how should skilled staff undertaking R&D work at outsource firms be managed from a human resources point of view? Having decided to outsource R&D, foreign outsourcer companies expect Indian outsourcee firms to deliver high quality innovative output, often against tight time frames. First, some theories are discussed. Thereafter, a number of propositions derived from theory are presented. In this study, the propositions were empirically tested using field data. The study took the form of a multiple-case study involving 16 selected companies in Bangalore, India