Research which investigated IT outsourcing has primarily focused on the operational outcome, such as cost savings and efficiency, rather than the strategic impact, such as innovation. By integrating transaction cost economics and organizational learning perspective, our study proposes a framework to investigate the effects of IT service outsourcing on four types of client’s product innovation, namely, incremental, modular, architectural and radical. We seek to examine how two patterns of organizational learning, i.e., exploratory and exploitative, can positively moderate these effects. In particular, we highlight the fit between organizational learning and product innovation types. We intend to test our hypotheses with a field study. With the findings, we anticipate five major theoretical and practical contributions.