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1 – 10 of over 1000Sameer Kumar, Anthony Kwong and Chandan Misra
Offshoring involves transferring or sharing management control and/or decision making of a business function to a supplier in a different country, which entails a degree of…
Abstract
Purpose
Offshoring involves transferring or sharing management control and/or decision making of a business function to a supplier in a different country, which entails a degree of two‐way information exchange, coordination and trust between the overseas supplier and its client. The purpose of this paper is to understand the current trend of offshoring and identify the risks involved in offshoring. This paper also proposes a risk mitigation strategy to combat offshoring risks.
Design/methodology/approach
The research is primarily based on professional literature reviews to identify risks associated with offshoring, which are mainly classified, in structural and operational risks categories. Additional risks are identified in the following areas: transaction, financial, value, socio‐economic, country risks and so forth. This research provides mitigation strategies to minimize or eliminate these risks. A survey of business individuals is used to determine the general perceptions of offshoring and the associated risks. Finally, the mitigation strategy is applied in a real‐life instance to validate its usefulness.
Findings
The research indicates that a majority of business professionals have little or no knowledge of methods to mitigate offshoring risk, though the marketplace trend is towards more offshoring in the future. Companies continue to increase the amount of offshoring activities without properly considering the associated risks.
Practical implications
The effects of improper implementation of offshoring activities have led to much publicized product recalls that have harmed firm profits. Managers need to use the developed mitigation strategy or develop their own model to address the risks of offshoring. Continued failure to do so will become evident as product recalls increase and customer satisfaction levels decrease.
Originality/value
This study serves as a framework for the thought process that should occur for successful offshoring activities. Companies that use this framework should tailor it to their individual situations to maximize its efficacy.
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Hokey Min, Heekeon Park and Seung Bum Ahn
An indiscreet strategy of offshoring from low-cost countries (LCCs) can do more harm than good, since invisible supply chain risks may increase hidden costs and subsequently more…
Abstract
Purpose
An indiscreet strategy of offshoring from low-cost countries (LCCs) can do more harm than good, since invisible supply chain risks may increase hidden costs and subsequently more than offset cost-saving opportunities. Considering the potential impact of these risks on offshoring, the purpose of this paper is to identify risk factors that significantly hinder the efficiency of offshoring and then measure specific risks associated with offshoring in foreign countries.
Design/methodology/approach
This paper develops performance metrics for gauging the offshoring attractiveness of potential sourcing countries using data envelopment analysis and then identifies the benchmark sourcing country using the analytic hierarchy process (AHP).
Findings
This study reveals that, defying the conventional wisdom, LCCs are not necessarily the most desirable offshoring destinations. This study also discovers that LCCs tend to be less business friendly, less logistically efficient, and riskier to source than their high-income country counterparts.
Originality/value
This paper is one of the first to introduce the concept of wealth creation efficiency for an offshoring decision and consider a host of key determinants such as wealth creation efficiency, logistics efficiency, business friendliness, and various supply chain risks for selecting the most desirable offshoring destination.
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Fazli Haleem, Sami Farooq, Brian Vejrum Wæhrens and Harry Boer
Many factors have been identified that may drive a firm’s decision to offshore production activities. The actual performance effects of offshoring, however, depend on the extent…
Abstract
Purpose
Many factors have been identified that may drive a firm’s decision to offshore production activities. The actual performance effects of offshoring, however, depend on the extent to which these drivers are realized. Furthermore, the question is how risk management helps mitigating the risk involved in offshoring ventures, thus leading to better performance outcomes. The purpose of this study is to investigate the extent to which realized offshoring drivers and risk management mediate the relationship between offshoring experience and firm performance.
Design/methodology/approach
Data from the Global Operations Networks project, a cross-sectional survey administered in Denmark and Sweden, are used to test two hypotheses on the mediating role of realized offshoring drivers and risk management in the relationship between offshoring experience and firm performance. AMOS version 23 is used to perform the analyses.
Findings
The results demonstrate that realized offshoring drivers fully mediate the relationship between offshoring experience and firm performance. However, risk management does not mediate the relationship between offshoring experience and firm performance.
Originality/value
This study develops new theory on, and managerial insight into, the mediating role of realized offshoring drivers and risk management in the relationship between offshoring experience and firm performance.
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Chitra Sharma and Anjali Kaushik
Offshoring is a common practice to operationalize global business strategies. Data protection and privacy assurance are major concerns in such international arrangements. This…
Abstract
Purpose
Offshoring is a common practice to operationalize global business strategies. Data protection and privacy assurance are major concerns in such international arrangements. This paper aims to examine the strategy adopted to ensure privacy assurance in offshoring arrangements.
Design/methodology/approach
This is a literature review to understand privacy assurance strategies adopted in offshoring arrangements and an exploratory case study of captive offshoring arrangement with onshore location in Canada and offshoring locations in India and Philippines. A comparative analysis of the privacy laws and privacy principles of Canada, Philippines and India has been done.
Findings
It was found that at the time of migration of process or work to the offshore location, organizations follow a conformist privacy strategy; however, once in business as usual mode, they follow entrepreneur privacy strategy. Privacy impact assessment (PIA) was found to be an important element in resolving the “administrative problem” of an offshoring organization’s privacy assurance strategy.
Research limitations/implications
The core privacy principles are outlined in the PIA templates; however, the current templates are designed to meet the conformist strategy and may need to be revised to include the cultural aspects, training, audit and information security requirements to plan and deliver on the entrepreneur strategy.
Practical implications
Offshoring organizations can benefit by planning for entrepreneur privacy assurance strategy at the inception stage. Enhancements to PIA templates to facilitate the same have been suggested.
Originality/value
Privacy assurance strategy followed by organizations while offshoring has been examined. This paper suggests extending the PIA process so that it covers privacy assurance requirements in offshoring arrangements. The learnings can be used in managing privacy assurance requirements in similar multi-country offshore arrangements.
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Zaza Nadja Lee Hansen, Yufeng Zhang and Saeema Ahmed‐Kristensen
Companies are increasingly engaged with global engineering networks through offshoring of product development activities from R&D to production. This creates many new challenges…
Abstract
Purpose
Companies are increasingly engaged with global engineering networks through offshoring of product development activities from R&D to production. This creates many new challenges as operations get physically and culturally decoupled. The purpose of this paper is to improve understanding of how to effectively manage engineering offshoring activities in a context of global engineering networks. The main research question, therefore, is: “Can offshoring of engineering tasks be explained and managed using the concept of Global Engineering Networks (GEN)?” Effective approaches to handling the associated risks of engineering offshoring will be a key area of the investigation.
Design/methodology/approach
The research approach is based on the engineering design research methodology developed by Blessing and Chakrabarti, including a descriptive phase and a prescriptive phase. Four case studies of large multinational corporations in Denmark were carried out. Data gathering was mainly documentary studies and interviews. The main data analysis approaches were coding (Strauss and Corbin) and pattern‐matching (Yin). The dataset was analysed using the GEN framework suggested by Zhang et al. and Zhang and Gregory.
Findings
Engineering offshoring presents companies with challenges related to communication and knowledge sharing which is addressed through formal and informal mechanisms as well as a more streamlined operation. However, this did not remove the challenges. The GEN framework suggests a systematic approach to understanding global engineering networks through investigating their contextual features, critical capabilities to compete in a particular contextual circumstance, and configuration characteristics to deliver the capabilities. Using the GEN framework, the challenges faced by companies and the risks associated with their engineering offshoring activities can be explained as a mismatch between the required capabilities and the companies' ability to deliver these capabilities.
Originality/value
This paper provides new theoretical insight into both engineering offshoring and GEN theories by extending the GEN framework to address complications within engineering offshoring. This strengthens both academic fields, and will be able to help engineering managers to develop appropriate engineering network configurations for offshore engineering operations.
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Partha Mohapatra, Dina F El-Mahdy and Li Xu
The purpose of this study is to develop a research agenda on internal controls for offshored accounting processes. It further develops a linkage between internal controls of…
Abstract
Purpose
The purpose of this study is to develop a research agenda on internal controls for offshored accounting processes. It further develops a linkage between internal controls of offshored accounting processes and auditing of the organization. Offshoring of accounting processes has become a common business practice, pursued by firms to reduce costs and focus on core competencies. However, our understanding about internal controls of these offshored processes is limited.
Design/methodology/approach
Grounded in theory that is supported by prior literature and interviews with practitioners, this paper attempts to develop a research agenda on internal controls for offshored accounting processes.
Findings
The main findings of our study suggest that while offshoring saves costs and allows the clients to focus on their core competencies, it also poses risks to the clients’ organizations. To mitigate these risks and comply with the regulatory requirements of the countries where the clients are located, clients and their offshore vendors need to effectively establish adequate internal controls for offshored business processes. Clients should seek those vendors who have appropriate processes in place and are willing to provide Service Organization Control (SOC) reports (or at least are capable of getting a SOC report in the near future). Moreover, clients should avoid offshoring the processes that would exist in defective internal control systems. Similarly, vendors should avoid undertaking those processes for which they are incapable of maintaining efficient internal controls.
Practical implications
Our study has implications for academicians as well as practitioners on understanding the determinants and consequences of internal control for offshored processes.
Originality/value
While internal controls for offshored accounting process and related regulatory changes have been increasingly important topics, little research has been devoted to explore their implications on accounting and auditing literature. We attempt to bridge this gap by synthesizing prior research on internal controls and auditing, and further developing a set of research questions for academic research. Our hope is to spur a new area of research that has not been explored before.
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Michael Brandau and Andreas H. Hoffjan
The paper seeks to explore the extent of involvement of management accounting in strategic inter‐organizational decisions and control in the context of offshoring of services.
Abstract
Purpose
The paper seeks to explore the extent of involvement of management accounting in strategic inter‐organizational decisions and control in the context of offshoring of services.
Design/methodology/approach
For the present study, a multiple case study field research design was selected. A data‐bank media search identified companies actually offshoring their services. In total, 17 semi‐structured interviews with management accountants/managers were conducted in 14 of the identified companies. The interviews were analyzed using content analysis techniques.
Findings
Management accounting is involved in offshoring activities to a much lower extent than expected. The reasons range from contractual agreements between the different parties, which substitute in part for management accounting interventions, to competence problems in accounting departments. Therefore, management accounting often fails to provide support for strategic planning and coordination.
Research limitations/implications
The data obtained through the qualitative research approach have a low‐scaling level, which limits subsequent analysis to descriptive statistics only.
Practical implications
The paper identifies risks and actual problems associated with offshoring, which indicate an increased need for coordinated planning and information processing. Furthermore, it raises the question of how management accounting can overcome existing competence problems with respect to the support of strategic decision making, in order to fulfil its function within the company more efficiently.
Originality/value
Literature does not provide convincing evidence of the practical significance of management accounting in the context of strategic decisions and inter‐organizational relations. This paper shows that management accounting currently remains far removed from its function as a developer of strategic decisions and as a support function for corporate planning and coordination processes.
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Brian Daugherty, Denise Dickins and M. G. Fennema
Offshoring is the process of using unaffiliated foreign companies or affiliated offshore entities (AOEs) to manufacture goods or perform services. The Big 4 public accounting…
Abstract
Offshoring is the process of using unaffiliated foreign companies or affiliated offshore entities (AOEs) to manufacture goods or perform services. The Big 4 public accounting firms offshore tax services (Houlder, 2007) and, more recently, have started to offshore audit tasks of their U.S.-based clients to AOEs located in India (Daugherty & Dickins, 2009). While the benefits of offshoring might be substantial, there are also costs associated with moving domestic work to foreign locations. One of these costs may be greater damage awards in lawsuits involving an audit failure where audit tasks were performed overseas as opposed to the United States. This study investigates that possibility by experimentally examining the effect of offshoring audit tasks requiring different levels of judgment on the amount of damages awarded by potential jurors as a result of an audit failure. The results show potential jurors awarded greater damages against the auditor when audit tasks were performed offshore than when they were performed in the United States. There was no effect of the level of judgment of the audit task on damages awarded. Since this study examines offshoring to only one location, India, results may not be generalizable to other offshore locations.
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Benedikt Wiesmann, Jochem Ronald Snoei, Per Hilletofth and David Eriksson
The purpose of this paper is to clarify the rather blurry concept of reshoring and its main drivers and barriers. At the same time, the paper seeks to provide a much-needed…
Abstract
Purpose
The purpose of this paper is to clarify the rather blurry concept of reshoring and its main drivers and barriers. At the same time, the paper seeks to provide a much-needed overview of the scientific theories used in previous research on reshoring.
Design/methodology/approach
The paper gathers information from previous published research. Data were collected through a systematic literature review on “reshoring” using primarily qualitative research techniques. Through a structured keyword search and subsequent elimination of papers, 22 peer-reviewed journal papers made it into the final review.
Findings
There is currently no consensus on the definition or “theory of reshoring”. Drivers and barriers could be grouped into five different sets of dynamics: global competitive dynamics, home country, host country, supply chain and firm-specific.
Research limitations/implications
Researchers need to consider the future development of the field and work toward an accepted terminology. Models about reshoring decisions need to include several decision criteria, which goes beyond financial metrics.
Practical implications
Practitioners need to carefully consider the decision to reshore as to not make rushed decisions. The final decision needs to consider factors such as quality, risk and brand reputation.
Originality/value
The paper is, to authors’ knowledge, the first overview of earlier research in a research journal. It provides a much-needed overview of an emerging field that can hold great importance for both future research and production. The constructed framework structures the dynamics (drivers and barriers) associated with reshoring.
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IT-enabled service offshoring has become a vital and widespread practice for firms seeking to realize various advantages. However, many firms suffer from “hidden costs” (the…
Abstract
Purpose
IT-enabled service offshoring has become a vital and widespread practice for firms seeking to realize various advantages. However, many firms suffer from “hidden costs” (the discrepancies between the expected and actual costs of offshoring), and these firms often find a disappointing outcome from their offshoring decisions. The purpose of this paper is to explore whether and how the adoption of an offshoring strategy can reduce such hidden costs and how this effect can be moderated by contextual factors, including the complexity of tasks and the accumulation of experience.
Design/methodology/approach
Based on survey data from the Offshoring Research Network, this study uses hierarchical regression analysis to empirically test the hypothesized relationships.
Findings
A corporate-wide strategy for guiding offshoring decisions may effectively reduce cost-estimation errors. This effect is amplified by increasing task complexity, but decreases with growing offshoring experience. Regardless of whether a strategy is initially in place, most firms learn to avoid cost-estimation errors only after several years. This finding suggests that firms have a limited ability to mitigate hidden costs in the short term.
Practical implications
The guidelines specified by an overarching strategy can better rationalize cost estimation and goal setting for individual offshoring projects, provide incentives for project participants to achieve preset aspirations, and enhance cost-efficiency in fulfilling offshoring activities and in coping with emerging contingencies. Firms tend to benefit more from establishing a formal strategy to reduce the hidden costs of more complex projects, especially if the firms involved have little offshoring experience.
Originality/value
This study empirically examines the hidden costs in offshoring from a strategic management perspective. This approach extends our understanding of cost estimates in offshoring, and it explores the influence of corporate strategy in the alignment of expected and achieved performances from IT-enabled service offshoring. The study also examines the boundaries of strategy’s ability to affect hidden costs, and it expands our knowledge of the relationship between strategy and experience.
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