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Article
Publication date: 17 August 2015

Revti Raman Sharma, Val Lindsay and Nikki Everton

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…

1401

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.

Details

Journal of Small Business and Enterprise Development, vol. 22 no. 3
Type: Research Article
ISSN: 1462-6004

Keywords

Article
Publication date: 4 November 2014

Seyed Hamed MoosaviRad, Sami Kara and Suphunnika Ibbotson

The value adding of each industry represents the value difference between the outputs and inputs of that industry. The purpose of this paper is to investigate the effect…

1238

Abstract

Purpose

The value adding of each industry represents the value difference between the outputs and inputs of that industry. The purpose of this paper is to investigate the effect of international outsourcing on the value adding of industries.

Design/methodology/approach

Input output analysis and linear programming are used as for the research methodology. Australian Motor Vehicle and Parts Manufacturing (AMVPM) industry as an outsourcer and its main suppliers were selected for ten alternative international outsourcing scenarios in a case study.

Findings

In all international outsourcing scenarios except the baseline scenario, the reduction in the value adding of Australia would be approximately three times more than the value adding reduction of the AMVPM industry. Moreover, the international outsourcing ratio has negative relationships with the value adding of the Australian industries and positive relationship with the international industries. Finally, it was found that the degree of supplier's dependency on the orders of the outsourcer effects the percentage reduction of supplier's value adding.

Research limitations/implications

The aggregated data and the uncertainties in the technical coefficients are the main limitations of this research. The social and environmental costs, other tangible and intangible costs, as well as benefits of international outsourcing need to be further analysed in future research.

Practical implications

This study would help decision makers at the macro level to analyse and control the effect of international outsourcing on the value adding of their economies.

Originality/value

This study expands the current research at the industry level of international outsourcing by quantifying the effect of international outsourcing upon the value adding of all respected industries.

Details

The International Journal of Logistics Management, vol. 25 no. 3
Type: Research Article
ISSN: 0957-4093

Keywords

Article
Publication date: 17 July 2009

Doren Chadee and Revti Raman

The purpose of this paper is to review the development of the empirical literature on international outsourcing of information technology services (ITS) over the 1992‐2007…

4291

Abstract

Purpose

The purpose of this paper is to review the development of the empirical literature on international outsourcing of information technology services (ITS) over the 1992‐2007 period and to identify future research areas.

Design/methodology/approach

A sample of 78 empirical academic publications on international outsourcing of ITS conducted between 1992 and 2007 across 46 scholarly journals constitutes the main data for analytical purposes. The sample is compiled following extensive electronic searches of the main academic databases. After clustering the studies in the sample according to their main research areas, a narrative approach is used to review developments in each cluster and to identify emerging research areas.

Findings

Four main areas of research are identified, namely outsourcing decision, outsourcing management (OSM), outsourcing outcome and the role of offshore service providers (OSPs). The review suggests that research efforts to date have been predominantly on outsourcing decision and OSM, mostly from the perspective of clients. Future research opportunities exist in the areas of outsourcing strategy and performance, the behaviour and performance of OSPs particularly within the context of firms from less‐developed countries competing globally, and the nature of competition among OSPs both within and among countries.

Originality/value

This is the first review which focuses on empirical studies of outsourcing for ITS. This paper identifies several gaps in the literature and points to the need for more research on outsourcing from the perspective of OSPs.

Details

International Marketing Review, vol. 26 no. 4/5
Type: Research Article
ISSN: 0265-1335

Keywords

Article
Publication date: 1 November 2011

Yang Yu and Valerie Lindsay

The purpose of this paper is to clarify the impact of international outsourcing on manufacturing strategy and performance of apparel manufacturing firms. The authors aim…

1411

Abstract

Purpose

The purpose of this paper is to clarify the impact of international outsourcing on manufacturing strategy and performance of apparel manufacturing firms. The authors aim to show how managers address the effects of international outsourcing on four dimensions of manufacturing strategy – cost, quality, flexibility and delivery.

Design/methodology/approach

The paper utilises a qualitative exploratory approach. The authors adopted a case study method, collecting data through face‐to‐face, semi‐structured interviews with managers of six apparel manufacturing firms, selected on the basis of a number of criteria, including their use of international outsourcing.

Findings

The findings show that international outsourcing generates both positive and negative effects on the firms' competencies in four manufacturing dimensions (cost, quality, flexibility and delivery). A conceptual framework is presented that shows how firms' managerial actions carried out to address the effects of outsourcing play a crucial role in determining their manufacturing performance.

Research limitations/implications

Because the sample comprised small and medium‐sized apparel firms from New Zealand, the findings may lack generalisability. Further research could expand this work to large multinational companies and service providers in international outsourcing.

Practical implications

The findings suggest that managers of apparel firms which engage in international outsourcing of manufacturing need to consider the impacts on their manufacturing strategy, particularly with respect to the potential trade‐offs between the manufacturing priorities.

Originality/value

The paper addresses a research gap in the outsourcing and manufacturing literatures by exploring the effects of international outsourcing on manufacturing strategy, and the impact of managerial responses to these effects, on firm performance.

Details

The International Journal of Logistics Management, vol. 22 no. 3
Type: Research Article
ISSN: 0957-4093

Keywords

Article
Publication date: 1 September 2004

Marc J. Schniederjans and Kathryn M. Zuckweiler

Outsourcing manufacturing and services to differing locations throughout the world is a common practice today. Yet, very little research has dealt with the known risks of…

8995

Abstract

Outsourcing manufacturing and services to differing locations throughout the world is a common practice today. Yet, very little research has dealt with the known risks of outsourcing when it takes place between business organizations in differing countries or in an international context. This study presents a quantitative model that permits the inclusion of international risk factors in the outsourcing‐insourcing decision. A Fortune 500 firm case study is used to illustrate the informational efficacy of the decision model.

Details

Management Decision, vol. 42 no. 8
Type: Research Article
ISSN: 0025-1747

Keywords

Article
Publication date: 15 February 2013

Andreas Größler, Bjørge Timenes Laugen, Rebecca Arkader and Afonso Fleury

The vast majority of literature relating to operations management originates from studies in developed markets. Emerging markets are increasingly important in global…

4162

Abstract

Purpose

The vast majority of literature relating to operations management originates from studies in developed markets. Emerging markets are increasingly important in global business. With this in mind, the purpose of this paper is to analyze differences in outsourcing strategies between manufacturing firms from emerging markets and from developed markets.

Design/methodology/approach

The paper is based on statistical analyses of a large data set of manufacturing firms obtained from the International Manufacturing Strategy Survey (IMSS).

Findings

The findings suggest that companies that outsource internationally focus on achieving cost benefits, while companies that outsource domestically focus on achieving capacity flexibility. In addition, the reasons to outsource were found to be independent of the location of firms in both emerging and developed markets. However, within the group of firms from emerging markets, strategies seem to differ according to whether firms are domestically owned or are subsidiaries of companies from developed markets.

Practical implications

The decisions of firms to outsource do not differ much whether the firms are located in developed‐ or in emerging‐market economies. Firms outsource domestically when they want to increase their capacity flexibility; they outsource internationally when looking for cost advantages.

Originality/value

The value of the paper is that it illuminates an important contemporary phenomenon based on analyses on data from a large‐scale international survey encompassing firms both in developed and in emerging markets.

Details

International Journal of Operations & Production Management, vol. 33 no. 3
Type: Research Article
ISSN: 0144-3577

Keywords

Article
Publication date: 17 November 2014

Andrea Martínez-Noya and Esteban García-Canal

This paper aims to, through the disintegration of the innovation process in this paper, attempt to shed light on what are some of the distinctive features of this…

Abstract

Purpose

This paper aims to, through the disintegration of the innovation process in this paper, attempt to shed light on what are some of the distinctive features of this phenomenon, such as: Who is outsourcing R&D? What types of R&D services are being outsourced across the R&D value chain and to whom? Where are firms outsourcing these services? and Why do firms decide to outsource them? Outsourcing practices of some stages of the R&D process to specialized providers have been gaining momentum during the past years even by firms operating in high-tech sectors.

Design/methodology/approach

The data used in this paper stem from an original international survey on R&D services outsourcing. This survey includes a sample of 182 US and European Union firms competing in technology-intensive industries.

Findings

This study provides evidence of the existence of a global outsourcing market that covers practically all the R&D stages and is widely used by technological firms. However, it highlights the importance of multinationality to be able to use R&D outsourcing as a tool for value creation.

Originality/value

Despite the relevance of this phenomenon, previous studies tend to analyze the R&D function as a whole. However, through the disintegration of the innovation process, this paper provides original international data which helps to analyze the real magnitude and scope of this R&D offshore outsourcing process at the transactional level.

Details

The Multinational Business Review, vol. 22 no. 4
Type: Research Article
ISSN: 1525-383X

Keywords

Article
Publication date: 22 February 2011

Paresha Sinha, Michèle E.M. Akoorie, Qiang Ding and Qian Wu

The purpose of this paper is to focus on the motivations for offshore outsourcing encountered by manufacturing small and medium‐sized enterprises (SMEs) and their…

4252

Abstract

Purpose

The purpose of this paper is to focus on the motivations for offshore outsourcing encountered by manufacturing small and medium‐sized enterprises (SMEs) and their suppliers in China. The paper explores the motivations and challenges encountered by SMEs choosing to outsource their manufacturing activities and why their suppliers engage with them.

Design/methodology/approach

A qualitative case study method was utilized. The authors obtained perspectives of SME managers as well as the suppliers for each of the cases, conducting in‐depth interviews in order to obtain comprehensive information about their outsourcing activities. Then, cross‐case analysis was carried out using content analysis techniques to identify key themes for the motivations to undertake offshore outsourcing.

Findings

The results showed that the first rationale for offshore outsourcing relates to increasing efficiency and labor cost reduction while holding quality constant. The second rationale is to maintain flexibility in resource allocation providing both manufacturing SMEs and their suppliers with an opportunity to enter new markets. For both manufacturing firms and their suppliers building a relationship through networks and alliances was the key to the success (learning orientation) of the partnership.

Practical implications

The managerial implications of the findings are that first, from the perspective of client firms, the most important factor for success in manufacturing offshore outsourcing was maintaining good relationships with suppliers. The benefits of having close relationships with suppliers for outsourcing firms helped them to secure the quality of their products. The second managerial implication is from the perspective of the supplier firms. Supplier firms which were also aware of the transaction cost implications of their delivery while improving their own international image by supplying international clients. The evidence supplied suggests that supplier firms can benefit from using networks to assist them to gain international exposure.

Originality/value

While there are numerous studies on offshore outsourcing by multinational enterprises (MNEs) and large enterprises, there are relatively fewer studies on manufacturing offshore outsourcing by SMEs. Using the three theoretical lenses of the transaction cost approach, the core competences and the alliances, networks and internationalization approach, the paper offers insights on the reasons for and outcomes of a group of SMEs decision to undertake offshoring‐manufacturing activities in China. Also, the paper examines the manufacturing offshore outsourcing issues from the perspective of the suppliers to these SMEs.

Details

Strategic Outsourcing: An International Journal, vol. 4 no. 1
Type: Research Article
ISSN: 1753-8297

Keywords

Article
Publication date: 20 February 2009

Arindam Banerjee and Scott A. Williams

International outsourcing has been traditionally looked upon as a low end cost effective servicing option to take advantage of the cost arbitrage that exists across…

3256

Abstract

Purpose

International outsourcing has been traditionally looked upon as a low end cost effective servicing option to take advantage of the cost arbitrage that exists across countries. Of late, many outsourcing vendors have realized that the advantages of cost differentials that spurred a lot of the global outsourcing business in the past 20 years will disappear in the medium term. The purpose of this paper is to provide a perspective about how much value addition, besides cost, traditional outsourcing vendors can provide and what may be the facilitator/inhibitors of such activities.

Design/methodology/approach

A case describing the setting up of an offshore analytics operation is presented, which gives a backdrop to the challenges faced in relatively high end value creation processes in a remote outsourced (offshore) environment. This provides some empirical support to a proposed model for facilitating the outsourcing of value‐added services.

Findings

A model is proposed for determining the degree to which value‐added services can be outsourced. The key dimensions that influence the degree of outsourcing are: the expertise of the vendor; the environmental stability of the offshore domain; the physical barriers to outsourcing complex business processes such as, communication problems and proximity issues; the possibility of knowledge leakage from the outsourcing domain; and the cost benefits of outsourcing.

Practical implications

The paper contends that conventional offshore‐based service vendors may find it difficult to acquire “expert power” and, set aside negative perceptions of “environmental stability” of their domain, in the pursuit to climb up the value chain in their client organizations. The validation of the proposed model is an opportunity for future research.

Originality/value

This paper is one of the first to present a model that will govern the growth of international outsourcing opportunities in high‐end value‐added processes. It also provides some directions for outsourcing vendors to enhance their capabilities over time to leverage this opportunity.

Details

Strategic Outsourcing: An International Journal, vol. 2 no. 1
Type: Research Article
ISSN: 1753-8297

Keywords

Book part
Publication date: 13 August 2014

Christopher Williams and Maya Kumar

We use experiential learning theory to develop new conceptual insights into offshore outsourcing of innovation. In particular, we show how offshore vendor firms are able…

Abstract

We use experiential learning theory to develop new conceptual insights into offshore outsourcing of innovation. In particular, we show how offshore vendor firms are able to overcome liability of outsidership and eventually learn how to innovate on behalf of their onshore clients as a result of their embedment with clients across multiple teams. We theorize that the cross-border relocation of innovative activities from a client firm to an offshore vendor is only possible when teams within the vendor team have assumed a double-loop learning capability from the client allowing them to determine governing variables relating to the client’s organizational environment. Through direct on-the-job experience working with each other, international teams comprised in part from the vendor and in part from the client can undergo different learning transitions, which we classify as either relationship-oriented or task-oriented. These transitions determine the extent to which double-loop learning can be developed in offshore locations and are influenced by intra-team dynamics and the way the joint teams organize and manage themselves. Our perspective has implications for our understanding of organizational designs associated with both client and vendor multinational enterprises seeking to benefit from innovation in offshore outsourcing.

Details

Orchestration of the Global Network Organization
Type: Book
ISBN: 978-1-78350-953-9

Keywords

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