Problem-framing in new innovation spaces: insights from software outsourcing

This paper is concerned with the global distribution of innovation activity. It uses the case of the software industry to show that there is considerable scope for innovation as an incremental extension of routine outsourcing low-cost countries. To show this, the paper develops a new vocabulary for the analysis of innovation outsourcing in global value chains. It then draws on qualitative case study research focused on outsourcing from firms in OECD countries to firms in Bangalore, India. Some buyers are willing to farm out ‘advanced’ activities to firms of the new innovation spaces. But such advanced innovation activities are rarely outsourced on a standalone basis; instead they are integrated with standard services. Such ‘integrated’ innovation activities are difficult to identify and measure and they are therefore often overlooked. For this reason, much of the existing literature on outsourcing to developing countries fails to recognize that innovation tasks, even advanced ones, are becoming increasingly mobile. It also explains why innovative software activities including problem framing activities are likely to follow the relocation of routine ‘software production’ activities to the new innovation spaces.