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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.

To provide a theoretical explanation of why outsourcing relationships are inherently dynamic, in that the dependence of each party upon the other inevitably changes over time and thus so too will the power asymmetries between the parties.

Our approach is theoretical and draws upon insights from resource dependence theory, transaction cost economics, and the resource-based view of the firm, to focus on the power asymmetries between the focal firm undertaking the outsourcing and its suppliers. We illustrate our arguments using a longitudinal case study of the evolving relationship between Apple and the Foxconn Technology Group.

For supplier firms, the message is to upgrade, develop distinctive resources and capabilities, and diversify the customer base. Otherwise, suppliers will forever be condemned to low operating margins and the threat of being replaced by cheaper, more agile rivals. For focal firms, the message is not to rest on your laurels. The potency of isolating mechanisms may well dissipate, suppliers will no doubt strive to lessen their positions of dependence and competitors will inevitably emerge, with the result that once-profitable outsourcing arrangements may quickly erode.

We highlight the crucial role played by isolating mechanisms to underpin power asymmetries in outsourcing relationships, and thus enable focal firms to appropriate the rents from externalized value chain activities. We argue that the efficacy of many isolating mechanisms will tend to dissipate over time as competitors emerge to imitate successful strategies and products, and as resource and capability asymmetries erode.

Research on international experience notes its positive influence on subsequent international expansion by firms. We test this relationship in the context of the Indian software industry whose offerings, unlike many other services, are storable implying that delivery can be separated from production.

We analyzed the domestic expansion of a sample of publicly listed Indian software firms over the period 2000–2009 with help of Poisson regression.

We find that even internationally experienced Indian software firms might prefer to expand domestically because of limited financial and managerial resources and concerns about diluting their cost advantage. The storable and separable nature of software services will support this strategy of serving clients remotely. The domestic expansion of assets will, however, be slower for firms with the highest level of industry accreditation. It will also be slower if there are institutional pressures in the form of rivals locating development centers near clients in developed countries.

Our results demonstrate that international experience alone is not sufficient for firms to expand overseas.

Increased global sourcing of manufacturing and service activities has been a prominent part of the restructuring of firms’ supply chains in the 1990s and beyond. Academics and consultancy firms have largely supported the view of global sourcing as one of the key drivers of superior performance. As we are now increasingly discovering, the drawbacks of offshore outsourcing – or, put differently, the advantages of vertical integration – have been underestimated or even neglected. In this chapter, we first discuss the need to balance sourcing levels and then how global sourcing levels must achieve a strategic fit with the environment. Finally, we synthesize these balance and fit perspectives to suggest how, over time, changes in the fit alter the required balance in global sourcing. From this synthesis, we develop a number of future research questions related to important conceptual perspectives on sourcing. For managers we provide indications of how they can achieve a balance and a fit of their sourcing strategies.

We present a model that allows us to compare the effects that frictions involved in immigration and international outsourcing have on the skilled–unskilled wage inequality. We show that, for any given level of contractual friction in the production of intermediate goods, the wedge between the wages of the skilled and unskilled workers widens as the frictions in immigration wear out. The skilled–unskilled wage gap, for any given level of friction in immigration, is sensitive to variations in contractual frictions in intermediates that affect international outsourcing.

Defined as local manufacturing systems, industrial districts have been recognized as particularly important for the location of firms’ manufacturing activities intertwined with innovation processes. The debate on the internationalization of production has stressed the low value related to manufacturing within value chain activities (smile framework), emphasizing the need to focus on high value-added activities (R&D or marketing). Following multinational enterprises’ internationalization strategies, also district firms have progressively offshored their production phases in the past years. However, recent studies focused on backshoring have revamped the attention on the domestic control of production for firms’ competitiveness. This chapter explores district firms’ location choices for manufacturing activities between local and global. Based on an empirical analysis of about 260 Italian district firms specialized in mechanics, furniture, and fashion and supported by a case study investigation, our results show that despite district internationalization processes, a non-negligible amount of firms still carry out – in-house or through outsourcing – production activities at district level. Larger firms couple district production and long-term upstream outsourced internationalization activities. The district system confirms its role of pooling specialized competences and product know-how, being decisive for firms’ innovation and responsiveness to national and international markets. Backshoring, instead, is a very limited phenomenon and linked to upgrading strategies.

The objective of this study is to investigate how country risk, different political actions from the government and bureaucratic behavior influence the activities in industry supply chains (SCs) in emerging markets. The main objective of this study is to investigate the influence of these external stakeholders’ elements to the demand-side and supply-side drivers and barriers for improving competitiveness of Ready-Made Garment (RMG) industry in the way of analyzing supply chain. Considering the phenomenon of recent change in the RMG business environment and the competitiveness issues this study uses the principles of stakeholder and resource dependence theory and aims to find out some factors which influence to make an efficient supply chain for improving competitiveness. The RMG industry of Bangladesh is the case application of this study. Following a positivist paradigm, this study adopts a two phase sequential mixed-method research design consisting of qualitative and quantitative approaches. A tentative research model is developed first based on extensive literature review. Qualitative field study is then carried out to fine tune the initial research model. Findings from the qualitative method are also used to develop measures and instruments for the next phase of quantitative method. A survey is carried out with sample of top and middle level executives of different garment companies of Dhaka city in Bangladesh and the collected quantitative data are analyzed by partial least square-based structural equation modeling. The findings support eight hypotheses. From the analysis the external stakeholders’ elements like bureaucratic behavior and country risk have significant influence to the barriers. From the internal stakeholders’ point of view the manufacturers’ and buyers’ drivers have significant influence on the competitiveness. Therefore, stakeholders need to take proper action to reduce the barriers and increase the drivers, as the drivers have positive influence to improve competitiveness.

This study has both theoretical and practical contributions. This study represents an important contribution to the theory by integrating two theoretical perceptions to identify factors of the RMG industry’s SC that affect the competitiveness of the RMG industry. This research study contributes to the understanding of both external and internal stakeholders of national and international perspectives in the RMG (textile and clothing) business. It combines the insights of stakeholder and resource dependence theories along with the concept of the SC in improving effectiveness. In a practical sense, this study certainly contributes to the Bangladeshi RMG industry. In accordance with the desire of the RMG manufacturers, the research has shown that some influential constructs of the RMG industry’s SC affect the competitiveness of the RMG industry. The outcome of the study is useful for various stakeholders of the Bangladeshi RMG industry sector ranging from the government to various private organizations. The applications of this study are extendable through further adaptation in other industries and various geographic contexts.

The purpose of this paper is to investigate the effect of the organizational reconfiguration of offshoring on firms’ strategies. A consequence of offshoring is the need to reintegrate the geographically relocated organizational activities into a coherent organizational architecture. In order to do this, firms need a high degree of architectural knowledge, which is typically gained through learning by doing. We therefore argue that firms with more offshoring experience are more likely to include organizational objectives in their offshoring strategies. We develop and find support for this hypothesis using a mixed-method approach based on a qualitative case study and comprehensive data from the Offshoring Research Network. These findings contribute to research on the organizational design and architecture of offshoring and the dynamics of organizational architectures.

Purpose – In accordance to the globalized and competitive environment, traditional manufacturing sectors’ companies are being particularly forced to reshape their global strategy and reconfigurate their activities to survive. Due to the fact that these firms present special characteristics that make the change extremely difficult, this chapter tries to analyze the influence of managerial attitudes and characteristics on the decision of their international strategy.

Methodology/approach – The study was carried out in Spanish traditional manufacturing sectors through a questionnaire, obtaining a final sample of 115 SMEs. We performed a cluster analyses to classify groups of companies, innovative and rigid, and assessed their different perceptions and characteristics.

Findings – Our results show that the adoption of these new models of internationalization is indeed related to the attitude and characteristics of managers. We found that more innovative strategies are associated with managers with intermediate experience in business, higher education levels, and a more realistic perception of the severity of the situation, the influence of the environment, and its strategic capabilities.

Practical implications – This chapter evidences that there are still important internal barriers affecting the international competitiveness of these companies. We propose that more traditional strategies of internationalization in the manufacturing sectors should move toward more complex models that combine the advantages of the cooperation, multilocation, diversification, and integration of those key activities of the value chain. Therefore, we display the critical role of managers’ profile in this process.

Originality/value of the chapter – Despite the fact that many works have analyzed the determinants of strategic change, we offer a wider view considering the essential role of managers, by combining demographic and perception variables. Furthermore, we based this idea on the theoretical perspective known as managerial cognition; therefore, we give new explanatory factors on the decision of the international strategy.