Offshoring Strategies & Governance of Global Value Chains (original) (raw)
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Managing offshoring of complex products : Strategy and capabilities
2014
Offshoring is a hot topic in the industrial and academic community over the last few years, evolving from a focus on manufacturing to product development and R&D. Offshoring refers to the process of sourcing and coordinating tasks across national borders and can include both in-house and outsourced activities performed by a supplier. There is a lot of research guiding the decision of what, where and how to offshore, but research on how to implement offshoring strategies is rare. The purpose of this dissertation is to contribute to the knowledge on how companies deal with offshoring in practice, relating to strategy, planning and routines. It discusses what type of capabilities that is needed to gain the benefits of offshoring implementations. The research builds on case studies from two multinational companies offshoring product development from Sweden to captive and offshore development centres in India and China through a series of interviews, review of business documentation and other types of active engagements over time. This research highlights how the development and implementation of offshoring can be better understood by focusing on the middle management in the organization and how they relate to the top management directives when implementing an offshoring strategy. The thesis contributes to existing theory by explaining offshoring as a process, situated in a certain context and time. It defines key routines and capabilities needed to facilitate offshoring of complex product systems. Including context, timing and sequence when analysing offshoring help explain why some organizations fail to implement offshoring initiatives.
The Strategic Nexus of Offshoring and Outsourcing Decisions
One important effect of the increasing integration of the world economy is the rising importance of possibilities to offshore and outsource value-creating activities. In many industries, firms are able to disaggregate their value chains into smaller parts. This process allows for a less path-dependent approach to the firm’s ideal location profile (through offshoring and relocation) and control strategies (through outsourcing). This article argues that optimal decisions regarding individual processes recognize the linkages of these processes with the firm’s entire value chain. The article explores the magnitude, sequence and dynamics of interdependent decisions regarding the location and control of various parts of the value chain. By using case illustrations from the mobile handset and financial services industries, this article provides a novel perspective on the disintegration, mobility and re-integration of value chain activities in a global context.
Governing offshoring has become a major challenge for firms that run operations outside the home country. International business (IB) and supply chain management (SCM) literature offer different insights on the topic, focusing especially on possible governance modes and the drivers of this choice, with different perspectives. Grounding the discussion at the intersection between these two research fields, the present study first proposes a taxonomy of offshoring risks (i.e. tasks, operational, reputational and institutional), with corresponding risk factors in each category; then, a set of research propositions are formulated, in order to link these categories to the governance-mode choice. Furthermore, we argue that the risk-governance link is moderated by two relevant factors, that is, the offshoring firm size and the strategic relevance of the outsourced activity. As a result, we elaborate on the interrelation between IB and SCM theories, emphasising the impact of risk management and contingent factors in offshoring governance modes configurations.
Offshoring: Dimensions and diffusion of a new business concept
Journal of Purchasing and Supply Management, 2006
In order to leverage global cost differentials, companies are increasingly turning to offshoring. Nevertheless, discussions in research and practice on offshoring are characterized by the lack of a common definition as well as a theoretically grounded explanation for this phenomenon. This article presents an explicit definition in order to provide a stringent understanding of the term offshoring along the dimensions of contractual/legal arrangement and geographic location. Further, the driving forces of offshoring are analysed on the environmental and company levels. The article closes with a discussion of managerial implications and an outlook on aspects for further research. r
Framing Offshoring: Antecedents, Processes, and Outcomes
International Journal of Innovation and Technology Management, 2013
Following the increasing globalization of value chains, o®shoring is gaining importance for¯rms' competitiveness. Strategy, management, and organizational scholars have analyzed this phenomenon from di®erent theoretical lenses and with a variety of methodological approaches. However, literature lacks a framework within which to analyze¯rms' o®shoring strategies and processes. This paper proposes an interpretative framework to understand extant literature as well as to identify possible gaps to be ful¯lled with future research. The identi¯ed categories of the proposed interpretative framework are: antecedents, processes, and outcomes. We use case-based evidence to populate the framework and to highlight implications for innovation management.
Transforming capabilities in offshoring processes
Strategic Outsourcing: An International Journal, 2015
Purpose-This paper's focus is on how organisational capabilities, enhancing the dynamic capability perspective, evolve during a more than five-year offshoring process in four Danish SMEs. The strategic decision to offshore some manufacturing activities meant that capabilities were ruptured and had to be rebuilt. Design/methodology/approach-The empirical investigation took the form of qualitative case studies with a longitudinal orientation focusing in on a few events in the four cases (strategic change in the sourcing configuration) as a process research design (Pettigrew, 1990; Van de Ven, 2007). Interviews were transcribed and coded in NVivo. Findings-The four cases followed distinct trajectories, but they all changed their routines regarding how to handle knowledge, including both technology and human resources. A need for specific human resources acting as boundary spanners arose, transforming both intra-and inter-organisational practices in all four cases. More complex activities were moved offshore to enhance the dynamic capabilities of the companies regarding both product development as well as specific processes, thereby transforming/reconfiguring the organisational capabilities of the companies. However, in the two small-sized cases, more complex/less routinised activities were backsourced, demonstrating a significant problem over time with the development of sufficient organisational resources to maintain seizing and sensing capabilities within these companies in comparison with the two other medium-sized cases. 2 Research limitations-The fact that most of the data were generated from an inside-out perspective, taking the point of departure in the core firms, can be viewed as a limitation. Our data on the wider network are also limited. Finally, our interviews are conducted relatively infrequently when considering the length of the process. Practical implications-The four longitudinal cases show that the longer-term offshoring journey does not involve a single path or a single best practice. The cases show captive as well as outsourcing arrangements and even enterprise transformations. The cases demonstrate a common focus on finding and nurturing core suppliers and core business processes, which can be characterised as continual learning and development of organising capabilities. Originality/value-The study contributes to the growing body of research into dynamic (organisational) capabilities in an offshoring and SME context.
Selecting the governance mode when offshoring knowledge-intensive activities
Journal of Purchasing and Supply Management, 2018
The offshoring phenomenon has evolved in recent years, and can be understood from a threefold perspective: first, the evolution in the type of activity being offshored; second, the learning curve involving both the companies implementing offshoring and service providers; and third, the reasons for offshoring. This study proposes an empirical framework that will allow us to explore the interaction between the type of activity (specifically knowledge-intensive) and the drivers of the decision to select the most appropriate governance mode. Specifically, our results show that market-seeking drivers become the primary determinants prompting firms to offshore knowledge-intensive activities through a captive center. In contrast, the motivation to reduce costs moderates the decision to offshore knowledge-intensive activities by nurturing a preference for offshore outsourcing. The empirical evidence is supported by multi-country data from the Offshoring Research Network.
Managing Global Offshoring Strategies: A Case Approach
Journal of International Business Studies, 2007
This book provides a vibrant depiction of actual offshoring practices. The authors put forth eight cases in rich detail. These accounts of real-world scenarios highlight critical questions for academic research. In addition to eight chapters each devoted to an offshoring event at a Danish company, the text includes opening and closing remarks. The introductory chapter provides a strong summary of the phenomenon in general and the context in particular. Pyndt and Pedersen’s overarching message is that there are many different successful strategies. They use a typology to present the phenomenon in two dimensions: internalization and internationalization. Within this typology, offshoring is synon- ymous with productive activity taking place outside the home country while outsourcing is productive activity taking place outside the enterprise. The cases then reveal that economic activity may be scattered along these different dimensions – even within a single Danish firm competing globally. While the firms are all Danish, what Pyndt and Pedersen relay is applicable to other European, Asian, or American enterprises. And while the actors and events in the cases represent valid universal business situations, the cases exhibit a refreshing tone that is largely absent in most classroom cases. Further, the typical North American case deals with strategy formulation but seldom implementation or execution. Some of these cases move beyond the ‘decision point’ to provide a glimpse of what is called for, but still leave plenty of open questions for the reader to analyze. The remark in the opening pages that offshoring is not a zero sum game, i.e., that the company that offshores and the recipient country both gain, needs to recognize the losses in the ‘home’ country. The offshored part of the business involves displaced workers and inputs no longer sought in the ‘home’ country. Outsourcing decisions ‘have come under increasing scrutiny and criticism’ (Graf and Mudambi, 2005: 254). This politically charged discussion usually begins with savings in labor costs (Ramamurti, 2004). Lewin (2005: 491) offers that, ‘companies in countries with strong society/worker compacts may experience greater challenges in adopting and executing offshoring strategies.’ Less tactfully, a myopic unionized workforce (stereotypically inflexible and with high wages) may lead to its own demise.
Offshoring and access to location-specific advantages - the impact of governance mode and function
2014
Most of the existing literature aimed at predicting offshoring success and performance implications does not provide consistent performance results. We suggest that this is due to the existence of a "missing link" between of firms' offshoring strategies and performance. In this paper, we identify how access to particular offshoring advantages may provide this link. The results of a quantitative survey of more than 1000 Scandinavian firms show that certain offshoring factors (governance mode and type of offshored function) indeed impact the access a company acquires to certain offshoring advantages, which may explain the unpredictability of previous performance outcomes.