"How P&G Tripled Its Innovation Success Rate" by Bruce Brown and Scott Anthony (2011)
This article by Brown & Anthony (2011) illustrates for me one of the difficulties of seeking to identify a strong link between innovation and outsourcing. All of P&G's efforts towards innovation appear to be corporate internalisations of one kind or another and not outsourcing at all.
Likewise the TedTalk by Nirmalya Kumar titled "India's invisible innovation" drills into the common criticism that the net impact of outsourcing to India has not resulted in innovation from India.
A more pessimistic reading of the outsourcing literature might see it as rather devoid of product or service innovation at all. In fact it might appear, if innovation is occurring at all then it seems to take place at the inter-firm competitive level, the level of markets, organisational forms, and business models.