Exploring political risk in offshoring engagements

This research focuses on the analysis of political risk in the context of offshoring decisions. The study uses the Repertory Grid Technique, which entails a series of semi-structured interviews exploring key political risk experiences across offshoring engagements. The research extends the spectrum of political risk analysis in the context of offshoring engagements, and explores the varied impact of political risk across business activity types. The research identifies five key political risks affecting offshoring engagements and highlights the moderating effect of specific offshoring activity types Business Process Outsourcing, Information Technology Outsourcing or Knowledge Process Outsourcing on political risk implications. The research explores the conditioning effect of activity specific exposure to political risk and enhances the explanatory ability of the Transaction Cost Economics constructs, offering a novel operationalisation of the political risk component of external uncertainty. From a practical perspective, the research highlights the need for developing managerial tools to improve monitoring and identification of risks. The key practical contribution is the development of differentiated political risk typologies that can capture the nuances of external risks in offshoring, allowing for more accurate risk assessment of offshoring decisions.     

Contextualisation of the complexity in the selection of developing country outsourcees by developed country outsourcers

Outsourcing research has recognised that selecting the right offshore supplier (outsourcee) in low-cost distant developing countries is complex, but central to outsourcing success. More specifically, the combination of outsourcee contextual internal factors (e.g. capabilities) with outsourced-to country contextual external factors (e.g. political, legal, economic, socio-cultural) as two fundamental and interconnected decisions firms make when outsourcing remains an underexplored research gap. Therefore, through a rigorous three-tier qualitative approach we, firstly, develop a contextual Environmental Separation Index (ESI) decision tool to help outsourcing firms in making more informed decisions when selecting outsourcees and outsourcing locations. Secondly, we operationalise the ESI as intuitive and easy to use decision tool, yet with a provision to deliver a truly context proof outsourcee selection decision. Thirdly, we adopt a complexity theory lens to explain that narrowing the contextual outsourcer–outsourcee gap facilitates a mind-set shift in outsourcing relationships from hierarchies to networks and from controlling to empowering developing country outsourcees. We show from a complexity theory perspective how contextual separation gaps between developed country outsourcers and developing country outsourcees can be an effective way to grasp the evolutionary path of outsourcing relationships.     

The magnitude of a product recall: offshore outsourcing vs. captive offshoring effects

The escalation in product recalls in recent years is attributed to the rise of globalisation and associated challenges of offshoring. Extant SCM research suggests that product recalls have a significant negative impact on financial performance, but gaps exist relative to the managerial actions to minimise their impact. Recall response strategies have become more important in the press, given that a single recall may result in the mandatory withdrawal of millions of products from the market, with firms incurring enormous logistics costs and brand damage. In this study, we address this gap in the research, and using a measure of product recall defined as the volume of products withdrawn from the market due to product quality failure. We explore the scale of the recall in the context of pharmaceutical sector global sourcing strategies, exploring whether the variation in global sourcing decisions not only increases the likelihood of a recall, but also influences the capability to minimise the total cost of recall. Our results suggest that offshore outsourcing and captive offshoring have opposite effects in terms of their influence on the magnitude of product recall. We summarise the implications through a compelling set of insights for future global sourcing strategy research themes.     

Modelling joint outsourcing and offshoring decisions

Offshoring and outsourcing have emerged as two most essential and important strategies for the manufacturing firms globally. This has happened due to the relentless forces of competition and globalisation, which has forced modern manufacturing firms to disaggregate themselves and reach for foreign investments, technological inputs through collaboration and cooperation among markets and partners. Outsourcing and offshoring simultaneously has potential to help the firm to meet three strategic goals i.e. ‘efficiency’ through cost minimisation; ‘exploration’ through an access to the right and technologically capable firm vendors/ Suppliers/ players; and ‘exploitation’ from development of global markets. Both outsourcing and offshoring have grown to a great extent either by the number of companies involved or by the number of multiple nations are involved. Hence, addressing both offshoring and outsourcing strategies together can provides value to the supply chain in economical and efficient way. Therefore, this paper is an attempt to model joint outsourcing and offshoring decision integrated with fuzzy-MCDM approaches using fuzzy data to optimise total cost through right selection of suppliers to meet demand of global markets, thus, achieving efficiency, exploration and exploitation. The model addresses qualitative and quantitative criteria in joint decisions and is also illustrated to show the cost effectiveness.     

Modelling of outsourcing decisions in global supply chains. An empirical study on supplier management performance with different outsourcing strategies

Outsourcing decisions in global supply chains are critical to a business’ competitiveness. This study investigates and compares the supplier management in Taiwanese enterprises under different outsourcing strategies. Base on an empirical study through questionnaires, we investigate the supplier management and critical success factors of the Taiwanese enterprises. It is shown that different outsourcing strategies should be deployed by different types of industries, and a good working relationship with suppliers and customers are paramount to success. The important issues related to supplier management include supplier capability to deliver on time, long term contract strategy with suppliers, supplier evaluation, and quality of material from suppliers.     

The dynamics of reshoring decisions and the role of purchasing

Reshoring is a reversal of offshoring decisions and is increasing in business practice. There is limited understanding of how different drivers relate to different reshoring decisions. There has been little examination of purchasing's role in reshoring decision-making. Through 25 case studies of reshoring decisions taken by 18 companies, this research examines the relationship between different drivers and the type of reshoring decision taken, and how purchasing was involved at different stages of the reshoring decision-making process. The findings reveal four types of reshoring; most companies made mono-dimensional reshoring decisions, and three types of mono-dimensional decisions were found. One type of bi-dimensional reshoring initiatives involved changed location and ownership. The most common drivers for reshoring were operational reasons and brand reputation, as reasons for the original offshoring decision had changed over time. Four types of involvement of purchasing in different stages of reshoring decisions were found: no involvement, operational involvement in implementation, early involvement in feasibility studies, and strategic involvement throughout the whole process. Different types of purchasing involvement were found to relate to different types of reshoring with particularly strong involvement in bi-dimensional reshoring decisions.     

Offshore Software Maintenance Outsourcing Process Model Validation: A Case Study Approach

The successful execution and management of Offshore Software Maintenance Outsourcing (OSMO) can be very beneficial for OSMO vendors and the OSMO client. Although a lot of research on software outsourcing is going on, most of the existing literature on offshore outsourcing deals with the outsourcing of software development only. Several frameworks have been developed focusing on guiding software system managers concerning offshore software outsourcing. However, none of these studies delivered comprehensive guidelines for managing the whole process of OSMO. There is a considerable lack of research working on managing OSMO from a vendor’s perspective. Therefore, to find the best practices for managing an OSMO process, it is necessary to further investigate such complex and multifaceted phenomena from the vendor’s perspective. This study validated the preliminary OSMO process model via a case study research approach. The results showed that the OSMO process model is applicable in an industrial setting with few changes. The industrial data collected during the case study enabled this paper to extend the preliminary OSMO process model. The refined version of the OSMO process model has four major phases including (i) Project Assessment, (ii) SLA (iii) Execution, and (iv) Risk.     

An evolutionary stage model of outsourcing and competence destruction: A Triad comparison of the consumer electronics industry

Abstract and Key Results

A framework for understanding institutional factors affecting the success and failure of offshoring models in India

The objective of this paper is to identify and analyse the factors that influence offshore location decisions from an institutional theory perspective. In the years, emerging economies have shown great growth potential and have attracted significant foreign direct investment, especially from companies willing to set up operations. Despite such a seemingly favourable trade environment, not all companies that entered an emerging economy have been successful. Thus, there is a need to understand the factors that influence the success of any offshore location decision. It is also important to understand the relative importance of these factors, in order to develop novel insights useful to practitioners. There is a lack of literature addressing this issue, which this study aims to fill. We conducted a multi-case analysis with examples of European companies entering India. The findings indicate that successful companies employed locally focused business strategies that enabled them to acquire important relationships and knowledge, and also to adapt to formal institutions, including governmental and regulatory procedures. It was found that, irrespective of size, disregarding collaborative strategies was the main reason for exiting India. These findings are highly relevant for managers and policy makers.     

Offshoring and Improvisational Learning: Empirical Insights into Developing Global R&D Capabilities

This study examines how global research and development (R&D) capabilities develop through improvisational learning. Using empirical insights from two large Swedish multinational companies and their early learning from establishing a captive R&D offshore unit in Bangalore, India, we use multicase inductive analysis to identify how companies cope with challenge related to coordinating R&D across geographically dispersed units through improvisational learning. Using a cooperative stage model analysis, we explain how improvisational learning occurs during the setup, start-up and ongoing stages of establishing captive R&D offshoring operations. We find that improvisational actions lead to developing routines as a response to solving unexpected coordination challenges and help explain how global R&D capabilities develop.     

设备维护外包策略及其对维护计划组织的影响

根据设备维护流程分析,提出了设备维护外包的三种外包策略--购进型外包、选择型外包和完全型外包.从组织结构、计划制定和资源协调三方面分析了设备维护外包的不同策略对设备维护计划组织的影响.     

Productivity measurement of the manufacturing process for outsourcing decisions: the case of a Taiwanese printed circuit board manufacturer

Outsourcing is used to alleviate capacity shortages and increase production flexibility. Generally, the outsourcing decision of manufacturing processes is determined by the capacity utilization rate and focus on individual process. In this article, multicriteria are considered by applying the data envelopment analysis to evaluate the relative efficiencies of all the manufacturing processes to help to assess the allocation of a company's resources. The Malmquist productivity index (MPI) is further employed to measure the productivity changes of each process, on which the outsourcing decision can be based. The empirical case of a Taiwanese printed circuit board manufacturer is applied to illustrate the outsourcing decision process. According to the outsourcing decision matrix proposed in this article, the manufacturing process with low efficiency score and MPI value was identified as a high priority for outsourcing. The outcome shows that the manufacturing process with a higher investment of fixed assets does not guarantee better efficiency. If a company follows the outsourcing decision suggested by the proposed approach, the capacity utility rate and the production quantity per person can be increased. The results and analysis model can provide an alternative for managerial thinking and practical application for outsourcing decisions.     

The influence of human capital investment on the exports of services and goods: An analysis of the top 25 services outsourcing countries

Abstract and Key Results

供应商风险管理中的排序问题

针对供应商风险管理中的五项风险指标:财务生存能力风险、资金周转风险、产品翻新风险、供应商权力风险和地理位置／政治形势风险,利用层次分析法(AnalyticalHierarchyProcess,简称AHP),通过建立风险排序层次结构模型、构造判断矩阵、准则层排序及一致性检验,对准则层,即上面所述的五项风险指标进行排序,在此基础上确定各个风险指标的权重系数,并和传统均值法确定风险指标的权重系数进行对比。最后对方案层,即供应商的风险进行总排序,科学地、系统地解决了风险管理中的排序问题。     

An outsourcing decision model for sustaining long-term performance

Outsourcing is a strategically important activity that enables an enterprise to achieve both short and long term benefits. An important but less well researched issue concerns outsourcing in relation to the long-term performance of an enterprise. This paper addresses this issue from the point of view of the protection of core competencies during outsourcing and by considering the trade-off necessary when certain amounts of knowledge transfer/sharing is inevitable. Two major outsourcing decision variables have been identified and quantified—the significance of the component/process technology involved and the risk of disclosing this technology to suppliers. Nine scenarios are generated by considering each of the two variables at three levels of severity: high, medium and low. Each scenario is explored in terms of the appropriate outsourcing approach, the appropriate management of the core competencies/knowledge, and the selection of suppliers. The validity of the outsourcing decision model is established using four products with 861 components from four manufacturing companies based in China.     

SME<Emphasis Type="SmallCaps">s</Emphasis>, Intellectual Capital,and Offshoring of Service Activities: An Empirical Investigation

Drawing on the extant research on offshoring in international business, entrepreneurship and strategy literature, we develop a model of offshoring of service activities by small and medium-sized firms (SMEs). Using the intellectual capital perspective as a theoretical framework, we hypothesize that the unique configuration of human, social and organizational capital of SMEs will be linked to offshoring of services to international providers. Using data from 119 SMEs in three industry sectors in the US and South Korea, we empirically test the hypothesized relationships and find at least some support for our predictions. Specifically, while we found no country-specific differences in offshoring, SMEs with more social capital and less human capital are more likely to engage in offshoring of service activities. However, the relationship between human and organizational capital and offshoring of such activities is contingent on the size of the SMEs. Implications for theory and practice are discussed.     

Risk management framework for outsourcing in the defence sector: a case from India

A nation automatically becomes strong if it has self-sufficiency to fulfil its defence requirements. India is moving in the direction to attain self-reliance in the defence sector. The aim of this paper is to analyse the critical issues faced in outsourcing by an organisation in Indian Defence Sector and extend easy, quick, complete and practically implementable risk mitigation strategies for enabling better decision-making. In this research, a list of 20 risk criteria is finalised on the basis of the literature survey and expert’s opinion. Analysis in this research shows that, three criteria which can seriously affect the outsourcing are Material shortage risk, Quality Risk and On-time delivery risk. The paper employs an integrated framework which includes ‘Grey Theory, Failure Mode and Effect Analysis (FMEA) and Risk Management Matrices’ for a comprehensive risk management in the defence sector. The paper delivers a 10-point risk management action plan to counter the various problems faced during outsourcing in the defence sector, especially in the Indian context. In brief, this paper investigates the various important issues related to outsourcing, which are faced by organisations working in Indian Defence Sector and extends a practically implementable methodology to derive a practically amicable solution for the case organisation.     

Network positioning and risk perception in servitization: evidence from the UK road transport industry

For manufacturing firms, the integration of advanced services into their customer offerings has become a crucial decision. Such commercial decisions require weighting the risks and rewards of implementing a business model based on advanced services. While academic experts acknowledge uncertainty of returns on investment despite potential advantages, research generally fails to address the challenge of calculating the actual risks involved in ‘servitization’. This paper seeks better understanding of managers’ risk perception and of servitization implications for strategic partnerships and network positioning, while considering the impact of factors such as entry barriers, technological knowledge and position in the supply chain (SC). Qualitative evidence is drawn from an industrial case study involving firms in the UK’s road transport industry: 14 in-depth interviews with senior executives from seven companies (manufacturers, operators, technology providers). During interviews, a payment card exercise measured risk perception and willingness to take strategic ‘make-or-buy’ decisions. Results suggest that implementing advanced services is perceived as a high-risk strategy, especially when firms lack in-house technological knowledge. However, collaborative strategic partnerships within supply chain networks can mitigate this risk and prove crucial to building entry barriers against external competitors. Based on these findings, implications for network positioning are developed.     

Determinants of internal and external R&D offshoring: evidence from Spanish firms

This paper analyses the determinants of R&D offshoring of Spanish firms using information from the Panel of Technological Innovation. We find that being an exporter, international technological cooperation, continuous R&D engagement, applying for patents, being a foreign subsidiary, and firm size are factors that positively affect the decision to offshore R&D. In addition, we find that a lack of financing is an obstacle relatively more important for independent firms than for firms that belong to business groups. For these latter, we also obtain that the factors that influence the decision to offshore R&D differ depending on whether the firm purchases the R&D services within the group or through the market: a higher degree of importance assigned to internal sources of information for innovation as compared to market sources increases (decreases) the probability of R&D offshoring only through the group (market).