Managing institutional differences for international outsourcing success: The case of a small New Zealand manufacturing firm

Abstract

Purpose

Most of the research on international outsourcing of value chain activities focuses on larger firms. The purpose of this paper is to fill an important research gap by exploring how small firms manage institutional differences to enhance their international outsourcing success.

Design/methodology/approach

The paper uses data from interviews conducted with two managers of a small New Zealand apparel manufacturing firm who have over 35 years of combined experience with international outsourcing. The firm had both failed and successful experiences in its international outsourcing ventures. Findings are discussed in the context of the extant literature on international outsourcing.

Findings

Small firms overcome institutional constraints they face in offshore locations by leveraging from their entrepreneurial skills, learning from failures and using a relational governance mode. This results in achieving performance targets and sustaining long-term relationships with suppliers, defined as international outsourcing success in this study.

Research limitations/implications

The findings may not be generalised as they are based on a single case and cover only the client perspective. The study contributes to the offshoring literature from the perspective of smaller firms and calls for quantitative investigations to generalise the findings.

Practical implications

The key implications include that small firms need to develop quality relationships and leverage from their unique entrepreneurial capabilities to enhance their success while outsourcing to relatively different institutional environments. Moreover, even a failed experience might help generate subsequent multiple successful ventures, if lessons are learned and behaviour adapted accordingly. Operating in emerging economies is much more challenging than managers from developed markets usually expect – thus the need for them to understand and prepare well before undertaking operations in these markets.

Originality/value

With the rise of international outsourcing of value chain activities, the findings are useful to small firms aiming to achieve success in their outsourcing ventures in offshore locations. This study is one of only a few studies investigating small firms’ international outsourcing that examines both failure and success in an institutionally diverse context.

Citation

Sharma, R.R., Lindsay, V. and Everton, N. (2015), "Managing institutional differences for international outsourcing success: The case of a small New Zealand manufacturing firm", Journal of Small Business and Enterprise Development, Vol. 22 No. 3, pp. 590-607. https://doi.org/10.1108/JSBED-06-2012-0071