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.