A multi-theory approach to understanding the business process outsourcing decision

This paper proposes a framework for understanding location distance and governance model choice in the business process outsourcing (BPO) decision. Much of the current international business (IB) literature employs location-specific factors alone to explain the BPO decision, and this literature is dominated by studies of the offshore location option, with limited attention given to the local and nearshore location distance options as alternatives to offshoring. The framework proposed here was developed from integrating firm-level and process-level factors with location attractiveness factors, and undertaking in-depth case study analysis of a number of German companies. The findings highlight the value of integrating firm-level and process-level factors with location attractiveness factors to understand location distance and governance model choice in the BPO decision, and support those who have argued that existing frameworks in this area cannot fully explain the complexities of the BPO decision. Moreover, the findings provide important insights into how these factors interact to influence location distance and governance model choice. The proposed BPO framework also provides a useful basis for practical prescription.