... needed and the draining of resources which could have been used more profitably elsewhere. Finally the firm must evaluate where the function can be produced most cheaply, in direct costs1. Summing up this simplefied problem will give a firm two sets of costs, the cheapest of which it should choose. This presentation is problematic for functions such as R&D. The firm's very existence is based- and dependent on its R&D. The firm is built around an idea where R&D is the function to develop the idea further or find related ideas which can be exploited. One can safely say that a firm will never outsource all R&D because that would to a great extent remove the whole justification for the firm. However a firm might want to outsource parts of R&D for different reasons. A whole set of problems arise if the firm wants to outsource this function. Chesbrough and Teece ...

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