Are they really opposite ends of the spectrum?
How about innovating through outsourcing?
One of the oldest outsourcing industry is Manufacturing.
Toyota has done miracles with its suppliers to innovate for decades. Actually, Toyota calls them partners rather than suppliers. When Toyota designs new components, it selects two or three suppliers, gives them approximate requirements, goals. The best design, price and performing component from a partner is chosen for the entire life of the vehicle. The vagueness in requirements is by design, so, it leaves enough room for suppliers to innovate within the scope of goals.
It is true one may not invent an original breakthrough search algorithm or new cool social networking idea with outsourcing, however, there is enormous possibility of innovating other types of products as long as they are riven by some goals - vague goals.
Methodical R&D efforts can be outsourced, for example drug discovery, to speed up innovating new products. The flexibility and operational efficiency is great, quality is the next natural evolution of outsourcing.
At present, the outsourcing is driven by operational efficiency, in the near future, this will change, and outsourcers are going to be viewed more like partners rather than as contractors.
In a flat world, outsourcers are partners