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Do Expectations Match Reality When Firms Consider the Risks of Offshoring? A Comparison of Risk Assessment by Firms with and Without Offshoring Experience

Published on Jan 1, 2013
· DOI :10.1007/978-1-4471-4908-8_16
P.D. Orberg Jensen12
Estimated H-index: 12
(CBS: Copenhagen Business School),
Torben Pedersen45
Estimated H-index: 45
(CBS: Copenhagen Business School),
Bent Petersen26
Estimated H-index: 26
(CBS: Copenhagen Business School)
Abstract
The risk associated with offshoring is a recurrent theme in research. However, previous research has mainly given a static picture of offshoring risks even though the strategies of offshoring firms, including their views on risks, may change as they gain experience in the field. In this chapter we investigate the influence of organizational learning on firms’ perceptions of the risks in offshoring. We use survey data from firms in Scandinavia and compare the risk assessments of firms without offshoring experience with firms that engage in offshoring. The findings show that firms without offshoring experience particularly stress exogenous risks while firms with offshoring experience see the endogenous risks as important. We offer two different interpretations of these results.
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  • Citations (1)
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References43
Newest
Published on Feb 1, 2011in Group & Organization Management 2.63
Kraiwinee Bunyaratavej8
Estimated H-index: 8
(Wesley College),
Jonathan P. Doh41
Estimated H-index: 41
(Villanova University)
+ 2 AuthorsSilvia Massini15
Estimated H-index: 15
Offshoring has emerged as an important economic and social phenomenon that has generated intense interest from practitioners, the popular media, and policy makers. In addition, there is a nascent but rich research literature on offshoring developing in management, international business (IB), and related fields. In this review, we survey and integrate offshoring literature from several disciplines and draw implications of this review for management and IB research. We conclude that offshoring ma...
68 Citations Source Cite
Published on Dec 1, 2010in Journal of Management Studies 5.33
Susan M. Mudambi17
Estimated H-index: 17
(TU: Temple University),
Stephen Tallman25
Estimated H-index: 25
(UR: University of Richmond)
Outsourcing knowledge and innovation activities offer cost savings and superior performance, but can also put a firm's unique resources and capabilities at risk. Characterizations of outsourcing as a make-or-buy decision do not fit well with decisions on knowledge process outsourcing (KPO). KPO is a make-or-ally decision, as firms seek a governance structure that will both protect and leverage their strategic knowledge assets, with the final decision often coming down to a choice between differe...
150 Citations Source Cite
Published on Aug 1, 2009in Journal of International Business Studies 6.20
Srilata Zaheer27
Estimated H-index: 27
(UMN: University of Minnesota),
Anna Lamin1
Estimated H-index: 1
(College of Business Administration),
Mani R. Subramani17
Estimated H-index: 17
(UMN: University of Minnesota)
We contrast the knowledge spillovers perspective, which focuses on the externalities that arise from locating in a cluster, with the social ties perspective, which emphasizes resource flow through ethnic connections, arguing that these factors differentially influence the location decisions of foreign and domestic entrants in the services-offshoring industry in India. We develop a typology of the capabilities involved in the offshoring of services and, using 108 location decisions across 11 city...
118 Citations Source Cite
Published on Jul 1, 2009in Journal of Risk Research 1.38
I.A. Harwood13
Estimated H-index: 13
(University of Southampton),
Stephen Ward22
Estimated H-index: 22
(University of Southampton),
Chris Chapman22
Estimated H-index: 22
(University of Southampton)
Organisational risk propensity directly affects the decision-making behaviour of employees, with linked impacts on the ongoing prosperity of the organisation. The literature on an individual's risk behaviour is extensive. However, few studies investigate the risk propensity of an organisation. This study uses primary data from interviews within a major change programme in a FTSE100 pharmaceutical organisation to explore the characteristics of organisational risk propensity. The data are analysed...
19 Citations Source Cite
Published on Jul 1, 2009in Journal of World Business 3.99
Ben L. Kedia22
Estimated H-index: 22
(U of M: University of Memphis),
Debmalya Mukherjee12
Estimated H-index: 12
(College of Business Administration)
We present an analytical framework explaining offshoring in this paper. We address the question: why do firms offshore their business functions? Given the growing prevalence of offshoring as a dominant business practice in the world of global business, this question merits further research attention. We propose that firms embark on offshoring when they perceive three sets of interrelated advantages: disintegration advantages (D), location-specific resourcing advantages (L) and externalization ad...
198 Citations Source Cite
Published on Jun 1, 2009in Journal of International Management 2.30
Masaaki Kotabe48
Estimated H-index: 48
(TU: Temple University),
Ram Mudambi42
Estimated H-index: 42
(TU: Temple University)
67 Citations Source Cite
Published on Jun 1, 2009in Journal of International Management 2.30
Jussi Hätönen4
Estimated H-index: 4
(UTU: University of Turku),
Taina Eriksson5
Estimated H-index: 5
(UTU: University of Turku)
Outsourcing is a phenomenon that as a practice originated in the 1950s, but it was not until the 1980s when the strategy became widely adopted in organizations. Since then, the strategy has evolved from a strictly cost focused approach towards more cooperative nature, in which cost is only one, often secondary, decision-making criterion. In the development of the strategy, three broad and somewhat overlapping, yet distinct phases can be identified: the era of the Big Bang, the era of the Bandwag...
229 Citations Source Cite
Published on Jun 1, 2009in Journal of International Management 2.30
P.D. Orberg Jensen12
Estimated H-index: 12
(CBS: Copenhagen Business School)
Based on longitudinal case studies of offshoring of advanced IT and engineering services from Danish firms to Indian firms, this paper explores organizational learning that occurs over time in both home and host firms and uses learning as a measure of the firm impact of advanced services offshoring. The findings are consistent with the theoretical view that advanced services offshoring must be understood as an antecedent for strategic business development and organizational change in both home a...
111 Citations Source Cite
Published on May 1, 2009in Journal of International Business Studies 6.20
Kuldeep Kumar22
Estimated H-index: 22
(FIU: Florida International University),
Paul C. van Fenema2
Estimated H-index: 2
(Tilburg University),
Mary Ann Von Glinow27
Estimated H-index: 27
(College of Business Administration)
A recent Offshoring Research Network (ORN) global survey of offshoring shows that since 2004 management concerns about operational issues on achieving the benefits of offshoring have increased significantly. In this paper we examine inter-task interdependence, a key operational determinant of inter-site interaction and communications in offshoring. We analyze existing theories of interdependence to examine the extent to which they provide guidance for understanding the interaction and communicat...
132 Citations Source Cite
Published on Feb 1, 2009in The World Economy 1.23
Mary Amiti26
Estimated H-index: 26
(Federal Reserve Bank of New York),
Shang-Jin Wei67
Estimated H-index: 67
(Columbia University)
The practice of sourcing service inputs from overseas suppliers has been growing in response to new technologies that have made it possible to trade in some business and computing services that were previously considered non-tradable. This paper estimates the effects of offshoring on productivity in US manufacturing industries between 1992 and 2000. It finds that service offshoring has a significant positive effect on productivity in the United States, accounting for around 10 per cent of labour...
159 Citations Source Cite
Cited By1
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Published on Jan 1, 2018in Journal of International Business Studies 6.20
Torben Schubert14
Estimated H-index: 14
(Lund University),
Elisabeth Baier7
Estimated H-index: 7
,
Christian Rammer21
Estimated H-index: 21
We develop a behavioural framework of bounded rational decision-making under uncertainty to analyse the role of technological dynamism in the firm’s environment for its decision to internationalise innovation. Applying prospect theory, we argue that technological uncertainty in the firm’s environment affects its risk preferences differently depending on its technological capabilities. A key prediction is that firms with low capabilities will internationalise innovation when faced by technologica...
4 Citations Source Cite