Sources of Innovation, Their Combinations and Strengths – Benefits at the NPD Project Level

External sourcing is increasingly seen as important for obtaining new and valuable knowledge and resources for new product development. However, when it comes to the specifics of choosing between sources and types of relationships, little is known on the NPD project level. This paper strengthens and expands existing research by investigating how the mix of external partner types as well as the relationship strength is related to performance at the project level. The empirical background is a survey conducted among Danish SMEs in 2010. Ordinary least square regressions reveal that firms should not only consider the potential benefits of collaboration with external sources but also the downsides, including higher cost and lengthier projects. Firms should look for opportunities in the combination of sources if they are to gain advantages of collaboration, as our analyses show that a mix of market and science sources is related to decreased costs. Additionally, if firms are looking for increased market performance, they should aim at collaborating with suppliers that have a similar knowledge base, whereas if the aim is lower project costs, collaboration with a customer with a similar knowledge base is beneficial. However, the degree of novelty in the new product is lower when companies are very closely embedded with suppliers.