Exploring the effect of familiarity and advisory services on innovation outcomes in outsourcing settings

Innovation through outsourcing can be hindered as a result of opportunistic behaviour. As a remedy, the extant literature encourages firms to enhance familiarity between the parties and/or consider using advisory services. In this paper, we seek to examine the effect of knowledge familiarity (client-supplier and supplier-client) and relational familiarity on innovation outcomes. Further, we also examine whether the presence of advisors improves innovation outcomes. Our results suggest that a higher degree of relational familiarity and client-supplier knowledge familiarity are associated with better innovation outcomes. We also reveal that client-supplier knowledge familiarity mediates the effect of supplier-client knowledge familiarity on innovation outcomes. We did not find support for the direct effect of advisors on innovation outcomes. Instead, the presence of advisors moderates the effect of supplier-client and relational familiarity on innovation outcomes. We consider the implications for the IS outsourcing literature and practice.