|Outsourcing of knowledge activities has become more popular as the world´s economy has
become increasingly knowledge-based in recent years (Parkhe, 2007). The knowledge that is
held by a firm is known as the firm’s Human Capital, which is considered the most important
intangible resource within a firm (Musteen & Ahsan, 2013). Further, researchers have found
that there is a relation between the level of human capital within a firm and the likelihood of
outsourcing knowledge-based processes (Mayer, Somaya, & Williamson, 2012).
The purpose of this study is to update and extend previous research by Mayer et al. (2012) on
the relation between human capital and outsourcing in knowledge-based processes, and to
reinforce its implications.
Based on US patent data from 2005 to 2015, we analyse 113 Fortune 500 firms and their
decisions to outsource the patent application process. We first identify the outsourced patents
based on a series of assumptions and controls. We propose that the decision to outsource a
patent application process is driven by the specific human capital in the firm, or the lack
thereof. We estimate the degree of accumulated human capital in the firm at the time of the
application drafting and analyse its effect on the outsourcing decision.
Our results support previous research on this topic. We find that relevant firm-specific and
industry-specific human capital in the firm decreases the probability of outsourcing, while the
degree to which the patent application process requires occupational human capital increases
this probability. We also find that the internal capacity of the firms’ legal departments is
negatively related to outsourcing of the patent application process.