Does Outsourcing of Product Development Influence the Rate of Product Recalls?

What is it about?

The paper examines when outsourcing of product development influences product recalls in the short-term and long-term. The findings are nuanced and suggest that NPD outsourcing offers benefits in the short-term whereas performing NPD in-house is beneficial in the long-run. Interestingly, the paper finds that firms need to possess NPD capabilities to benefit from both outsourcing and performing NPD in-house. The paper offers insights into why firms such as Toyota benefit from both NPD outsourcing and vertical integration.

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Why is it important?

The business press is awash with sentiment about the perils of NPD outsourcing and how it weakens the competitive position of the firm. Following the high profile recall of Toyota in 2009, concerns resurfaced that outsourcing may be responsible for Toyota’s quality woes. “Toyota used to buy parts from a small group of Japanese suppliers that were longtime partners. But, like almost all automakers, Toyota more recently has outsourced much of its manufacturing and production. Outsourcing may have played a part in the car maker’s problems.” Boeing 787’s lithium ion battery problems have also been attributed to the fact that Boeing sources more than 30% of its components from offshore vendors. Our recent research ( in the Journal of Marketing) examines the relationship between outsourcing of NPD and product quality using data from the automobile industry.