The impact of management capability on the resource-performance linkage: Examining Indian outsourcing providers

The increase in offshore outsourcing of information technology-enabled business processes has renewed scholarly attention to better understand the dynamics of service provider firms. In this study, we examine how offshore outsourcing service providers’ internal and relational resources and capabilities jointly predict their economic performance. Analysis of data collected from a sample of 105 Indian service providers suggest that rent generation from firm-specific, idiosyncratic resources is positively moderated by the level of management capability possessed by such firms. Theoretical and managerial implications of the findings are discussed and avenues of future research are offered.     

A passage to India: A dual case study of activities,processes and resources in offshore outsourcing of advanced services

Research has shown that offshore outsourcing processes may influence the behavior and strategic choices of firms, but little is known about the determining factors that influence the evolution and outcomes of those processes. Furthermore, longitudinal studies able to generate such insights are lacking. This paper suggests a detailed, activity-based approach to the study of the process of offshore outsourcing of high-value, advanced service activities. While earlier research has considered either firm-internal or firm-external sources of resource building, this study offers a more comprehensive theoretical model that combines resource-based theory and international business network theory. It aims to investigate how determinants of the offshore outsourcing process contribute to the resource stocks of client firms. Based on two longitudinal case studies of offshore outsourcing to India, the study finds that offshore outsourcing operations, in general, make positive contributions to the resource stocks of client firms. Some determinants contribute to the building of resources (partnership commitment decisions, knowledge creation and learning, trust building, the interconnectedness of resources) while others impede resource building (time compression diseconomies, lack of resource mass efficiencies). Notably, the interconnectedness among onshore activities, offshore activities and the underpinning knowledge resources reduces the risk of erosion of client firm resources, although this remains a long-term risk.     

Outsourcing: Think more expansively

Outsourcing refers to the practice of a firm entrusting to an external entity the performance of an activity that was performed erstwhile in-house. Although off-shoring and offshore outsourcing to suppliers have dominated much of the recent discussion and debate on outsourcing in scholarly journals and the business press, the nature and scope of outsourcing that does not transcend national boundaries, and outsourcing to entities other than to suppliers is quite substantial. Against this backdrop, a five sources outsourcing framework delineating a broad array of outsourcing avenues available to firms is proposed. For the most part, lowering costs as a motive underlying off-shoring and offshore outsourcing have dominated recent discussion. Furthermore, in the aftermath of the rapid growth in offshore outsourcing in the services sector, the technological forces underlying these developments have been extensively written about. Against this backdrop, the relevance of considerations other than cost in the outsourcing decisions of firms, and the role of technology in automating and thereby either making redundant an erstwhile outsourced activity or performing the activity in-house are discussed.     

The performance implications of outsourcing customer support to service providers in emerging versus established economies

Recent discussions in the business press query the contribution of customer-support outsourcing to firm performance. Despite the controversy surrounding its performance implications, customer-support outsourcing is still on the rise, especially to emerging markets. Against this backdrop, we study under which conditions customer-support outsourcing to providers from emerging versus established economies is more versus less successful. Our performance measure is the stock-market reaction around the outsourcing announcement date. While the stock market reacts, on average, more favorably when customer-support is outsourced to providers located in emerging markets as opposed to established economies, approximately 50% of the outsourcing firms in our sample experience negative abnormal returns. We find that the shareholder-value implications of customer-support outsourcing to emerging versus established economies are contingent on the nature of the customer support that is being outsourced and on the nature of the outsourcing firm. Customer-support outsourcing to emerging markets is less beneficial for services that are characterized by personal customer contact and high knowledge embeddedness than for customer-support services that involve impersonal customer contact and are low on knowledge embeddedness. Firms higher in marketing resource intensity and larger firms benefit more from outsourcing customer-support services to emerging markets than firms lower in marketing resource intensity and smaller firms.     

离岸IT服务外包发包方选择承接商的影响因素研究——基于上海地区的实证分析

本文基于上海地区,利用与本土IT外包承接企业有业务往来的跨国公司(发包方)数据,对离岸IT服务外包发包方选择承接商的影响因素进行研究。实证分析结果显示,承接企业的项目运营交付能力、国际市场品牌竞争力、行业知识和领域经验、技术和创新能力、风险管控能力等对发包方选择服务外包承接商有显著影响,跨文化沟通和协调、成本竞争力的影响不显著。本土服务外包承接企业可以根据这些因素有针对性地提升其在国际接包市场上的竞争力。     

Offshore Outsourcing and Non‐production Workers: Firm‐level Relationships Disaggregated by Skills and Suppliers

In analysing the impact of offshoring on the skill composition, previous empirical studies have established that offshoring firms employ more non‐production workers. However, not all non‐production workers are highly skilled. This paper disaggregates non‐production workers into the following three categories: (i) skilled non‐production workers, (ii) unskilled non‐production workers and (iii) non‐production workers with special skills for offshoring and other overseas business management. By linking our offshoring survey data with firm‐level data for Japanese manufacturing firms, this paper finds that the share of skilled non‐production workers tends to be significantly high in offshoring firms but that of unskilled non‐production workers is not. As offshoring has expanded from production to non‐production tasks, this result implies that the distinction between skilled versus unskilled workers becomes critical among non‐production workers. Using our unique data on supplier types in offshoring, this paper finds that the share of non‐production workers for the management of overseas activities tends to be high in foreign direct investment firms and in firms outsourcing to foreign independent suppliers, but not in Japanese firms outsourcing to offshore suppliers located abroad but owned by other Japanese firms. This difference indicates that coordination burdens are likely to be at least partly mitigated by common languages or shared business practices. These findings suggest that offshoring has different impacts on employment depending on suppliers and the worker’s skill. The principal results are confirmed robust even after various firm characteristics are controlled for in panel regressions, though we should not give any causal interpretations.     

The influence of business groups on board composition in offshore financial multinational enterprises

Based on resource dependence theory we argue for an influence of business groups (BGs) on the board composition of constituent offshore financial multinational enterprises (FMNEs). Using a unique sample of 171 Caribbean FMNEs in an inter-island BG setting, we find BGs’ control in constituent firms to be indicative of the importance of the internal financing and intermediation within the group network. This control leads to a higher proportion of lawyers hired to the boards of directors in BG-constituent firms and supports the argument that lawyers provide skills in complex offshore regulatory frameworks that facilitate BGs’ optimal tax management. Furthermore, we observe that an increased adoption of shareholder rights governance by BG-constituent firms is associated with increased engagement with outside resource providers, increased potential conflicts of interest and hence a need for hiring more lawyers. Our interpretation is that offshore FMNEs have a need for more lawyers, whose legal skill is critical to the competitive advantage of FMNEs.     

An Empirical Analysis of Motives for Offshore Outsourcing by U.S. Firms

In light of the political debate on offshore outsourcing, this article examines firm financial characteristics associated with the probability of being identified as an outsourcer. In a sample of S&P 500 firms, we find that firms identified as outsourcers operate in more competitive industries and have relatively worse operating performance, higher administrative overhead, and higher labor overhead. These firm characteristics are consistent with cost-cutting objectives and the need to respond to competitive pressures. We find that the need to lower labor costs is a significant determinant of manufacturing firms locating operations overseas, while lowering administrative overhead influences service firms' outsourcing decisions. From a policy perspective, our results suggest that the political pressure to limit firms' ability to offshore outsource will likely reduce their flexibility to respond to operating and competitive challenges.     

Governance decisions for the offshore outsourcing of new product development in technology intensive markets

This study addresses how buyers organize their offshore outsourcing new product development relationships. Building on transaction cost economics and resource dependence theories, we propose a model of the influence of key new product development offshore outsourcing factors on two important buyers’ governance decisions (i.e., supply concentration and degree of supplier involvement). The antecedents, drawn from the marketing, management, and international business literatures, include: three sources of asset specificity (degree of modularity, strategic value of the project, and technology specificity) and two sources of uncertainty (cultural distance and technological discontinuity). The results, derived from an analysis of 200 offshore outsourcing new product development relationships, provide new insights for academics and practitioners.     

How market orientation and outsourcing create capability and impact business performance

For most firms, developing the capability to compete and perform is crucial. The literature suggests that market orientation and outsourcing are two such sources for building capabilities in the marketplace. However, the relative contribution of market orientation and outsourcing to capability and superior business performance is unclear. To bring clarity, two pathways through which market orientation and outsourcing build capability and enhance business performance are proposed. Using data from foreign and Indian firms, the results indicate that both market orientation and outsourcing contribute to building capability, and that outsourcing further contributes to business performance. Also, it was discovered that low‐risk market‐oriented and high‐risk outsourcing firms experienced a positive impact on business performance. The implication of these results for managers is that market orientation and outsourcing can be complementary tools in their efforts to build capability, enhance business performance, and manage risky environmental conditions. © 2009 Wiley Periodicals, Inc.     

How Institutional Change Reconfigures Successful Value Chains: The Case of Western Pharma Corporations in China

Management researchers have traditionally emphasized two main factors in the definition of corporate strategies: internal capabilities and industry competition. However, in less stable, transition economies it is particularly the changing institutional environment that influences strategy definition and performance of multinational corporations (MNCs) as shown by numerous international business (IB) scholars. Yet, how institutions matter remains a largely unresolved question. This article examines how institutions have affected the value chain configuration of Western pharmaceutical firms in China. Our research framework identifies four major strategic shifts along the value chain of Western firms in the pharmaceutical industry: upgrading along the value chain, outsourcing to contract service providers, expansion of geographical scope and diversification of product portfolio. The findings allow concrete managerial implications to be derived for decision makers of Western pharmaceutical firms operating in China. © 2013 Wiley Periodicals, Inc.     

The Impact of Subprime Crisis on Asia-Pacific Islamic Stock Markets

This article looks at the link between the need for the pursuit of cost advantages via labor arbitrage on one hand, and the need for continued learning and sustainable competitive advantage on the other. We first define outsourcing and off-shoring and then provide a review of the primary elements of the first wave of outsourcing. We then turn to discussing some proactive mechanisms that national governments should consider to counter the short-term impacts concomitant with the first wave of outsourcing of jobs offshore. Finally, we discuss the next steps that firms need to consider in the ever-changing landscape of international competition.     

欧盟金融服务离岸外包:现状、特点与趋势

近年来,金融服务外包已成为全球金融业的一大发展趋势,并引起欧盟经济社会的广泛关注．欧盟金融服务业在离岸外包的机遇和挑战中积极参与全球竞争。因此分析欧盟金融服务离岸外包的发展现状和趋势,欧盟银行服务外包的模式、业务范围和动机,讨论银行业务外包所涉及的主要风险以及相关的监管原则和措施,以及研究欧盟金融服务外包市场的特点与发展前景,均对我国发展服务外包承接业务有参考意义。     

Building Capability for Organizational Success: An Emerging Market Perspective

In the world of business, developing the capability to succeed in the marketplace is a sine qua non for most organizations. An examination of studies on firm competitiveness indicates that market orientation, outsourcing, and technology transfer provide firms with the basis for building capability to succeed in the business environment. Nonetheless, in a developing nation context, the comparative influences of market orientation, outsourcing, and technology transfer on organizational success among foreign and local firms when considered together in a combined framework is yet to be investigated empirically. To gain clearer insights, three pathways through which market orientation, outsourcing, and technology transfer improve organizational success in Ghana are postulated. Findings of this study suggest that among foreign and Ghanaian businesses, there are variations in the contributions of market orientation, outsourcing, and technology transfer to developing capability and impacting on organizational success.     

Stakeholder Perceptions of Offshoring and Outsourcing: The Role of Embedded Issues

We contribute to the study of offshoring and outsourcing by examining how stakeholders’ ethical evaluations of these decisions are influenced by both their roles and the issues embedded within the decisions. Although offshoring and outsourcing have been studied from a transactional perspective, the moral issues embedded within these decisions can profoundly affect how the organization is perceived by outside stakeholders. First, we contend that investors use different moral paradigms compared with consumer stakeholders, as a result the stakeholder role an individual occupies significantly influences their ethical evaluation of offshoring and outsourcing decisions. Next, we examine whether embedded issues of product quality and information security increase the moral intensity of offshoring and outsourcing decisions, thereby negatively influencing ethical evaluations. Using vignettes, we find that respon- dents viewed either offshoring or outsourcing less favorably than relocation. Surprisingly, respondents viewed offshoring with data security risks more negatively than offshore outsourcing with quality risks, suggesting that the issue of information security has a greater moral intensity than the issue of product or service quality for both consumer and investor stakeholders. Thus, we show that that embedded issues play a significant role in stakeholders’ ethical judgments of business decisions, such as offshoring and outsourcing.     

The role of change management in implementing the offshore outsourcing business model: a processual view

By means of the case study approach, the nature and process of organizational change related to the implementation of offshore IT outsourcing and the effectiveness of approaches used to manage this change were examined in three information systems departments of a multinational pharmaceutical company. The findings reveal that a combination of contextual factors influenced the adoption and use of offshore outsourcing. Organizational factors involved in the diagnosis and planning as well as implementation phases that contribute to or prevent the successful management of change are identified, and the most commonly reported effects of change resulting from offshore outsourcing are also analyzed.     

企业价值:动荡环境中的重心?(中)

我们的目的是在变化的环境中,推动行业战略管理理论中“企业价值”的应用研究。借助五个不同行业中具有典型意义的企业,通过考察企业价值对消费者、顾客和客户的不同作用,从四个重要维度量化并分析了市场对企业公开声明的战略的观点,并且说明了在产业效应中考虑到动荡因素的可能性。结论是:特定行业在顾客对不同类型的动荡的感知面前是非常脆弱的,在很多大型企业中也是如此。笔者认为,相对于渐进变化环境中的企业价值,在激进、动荡市场环境或间断均衡中的企业价值更为明显,与顾客和客户的关系也更为紧密。     

Internationalisation of Japanese professional business service firms

This paper explores the internationalisation of Japanese professional business service (PBS) firms. The UK was chosen as the geographical area of study due to the large number of Japanese foreign direct investments over the last 20 years. A comparative study of Japanese and Western service providers was conducted in the UK in spring 2002 to ascertain if there are any significant differences in their ways of doing business with Japanese clients. The preliminary results show that Japanese firms tend to be very small in the UK in terms of both size and market share. They seem also to be tightly connected with Japanese businesses operating in the UK.     

中国承接离岸服务外包的人才需求与培养模式

人才是承接服务外包的命脉。虽然中国已经是全球第二大离岸服务外包承接大国,但服务外包专业人才数量短缺,供求结构失衡已经成为制约该产业快速发展的主要瓶颈。目前,培养离岸服务外包人才主要有高校"非订单式"、校企合作的"订单式"、政府设立的培训基地以及与国际知名大公司合作培训等四种模式,并都存在一定的弊端。应根据中国目前对离岸服务外包人才的需求情况,对现有的服务外包人才培养模式进行优化:以培养技术蓝领的职业教育和以培养中层白领技术、管理人才的高校专业教育为主;以国内外知名公司和机构培训高级管理和组织人才为辅,建立梯队式人才培养体系,满足中国离岸承接服务外包业对人才的需求。     

‘Do versus Buy’ Decisions in the Demand for Knowledge Intensive Business Services

The search for the maximum use of scale and agglomeration economies and the need to operate firms in the most flexible way have provided a strong impulse for companies to increase their use of external intermediate services. Because of their strategic role, the use of business services that are intensive both in labour qualification and in technological requirements is key for these policies. The purpose of this paper is to analyse the patterns followed by companies in the two relevant decisions on this issue: firstly, whether to use knowledge intensive business services or not and, secondly, whether (and to what extent) to buy these services from another firm or to provide them inside the organisation. In both cases, we intend to identify the factors that affect the ‘do versus buy’ decision with respect to total KIBS as well as particular categories. A specific feature in our study is that it focuses on the behaviour of firms working in a region without a well-developed supply of KIBS. Applying discrete response models to the data obtained in a survey elaborated by the authors, the most relevant variables for the use of KIBS are satisfaction with previous outsourcing experiences and location of the firm in a large urban centre, but they do not affect their external provision. The size of the firm, its export orientation and its technological complexity have opposite effects on use and outsourcing.