Business process outsourcing and dynamic innovation

Purpose – This paper aims to answer the question: how do clients and BPO service providers work together to foster dynamic innovation? Dynamic innovation is a process by which clients incent providers to deliver many innovations each year that improve the client's performance in terms of operational efficiency, process effectiveness and/or strategic impact. Design/methodology/approach – The paper is based on research conducted in 2011 and 2012 and includes 202 survey responses and 48 in-depth interviews in 24 client organizations. Findings – The most effective innovation incentives are mandatory productivity targets, innovation days, and gain-sharing at the project level. Threat of competition and special governance arrangements for innovation also positively influence innovation. The least successful incentives for innovations were found to be innovation funds, gainsharing at the relationship level, what has been called “pain-sharing”, and benchmarking. Research limitations/implications – The 24 BPO rela...