The Mediating Role of Innovation in Knowledge Process Outsourcing

Conducting knowledge process outsourcing (KPO) for sophisticated global clients is a learning curve and a complex journey that many emerging market-based service providers must navigate. In this study we establish a mediating framework, arguing that a KPO service provider’s internal and external knowledge process integration enhance its competitive performance through firm-level and product-level innovation. Drawing on the theories of organizational learning and dynamic capabilities, our empirical analysis of 205 KPO firms based in India suggests that the impact a KPO service provider’s knowledge process integration on performance is mediated through its firm-level and product-level innovation. This study contributes to the much-needed efforts in studying KPO, a new and fast-growing cross-border professional service activity, and provides helpful managerial implications to practicing global clients and offshore PSO service providers on how to successfully manage the outsourcing process to achieve expected benefits.