Outsourcing of new product development activities: a case study at Volkswagen of Brazil

Abstract

The paper aims to understand the reasons why Brazilian automotive subsidiaries performs outsourcing of activities in the process of new product development and the factors that affect those decisions. The analyses were conducted in light of a resource-based view and transaction costs. A qualitative case study based on interviews was carried out at a Brazilian Volkswagen subsidiary. The results reveal two ways of outsourcing: through engineering services and product development. The former occurs when the automaker is in charge of the equipment, risk, and rework. The latter occurs when a set of tasks is subcontracted. Thus, the supplier is in charge of the equipment, as well as of the financial risks and rework. The reasons for subcontracting are the lack of both important resources, which are strategic, and of the capability to perform certain activities, in addition to reducing costs and limiting headcount.