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Learning Paths to Offshore Outsourcing - From Cost Reduction to Knowledge Seeking

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Author Info

  • Peter Maskell
  • Torben Pedersen
  • Bent Petersen
  • Jens Dick-Nielsen

Abstract

A corporation’s offshore outsourcing may be seen as the result of a discrete, strategic decision taken in response to an increasing pressure from worldwide competition. However, empirical evidence of a representative cross-sector sample of international Danish firms indicates that offshore sourcing in low-cost countries is best described as a learning-by-doing process in which the offshore outsourcing of a corporation goes through a sequence of stages towards sourcing for innovation. Initially, a corporation’s outsourcing is driven by a desire for cost minimization. Over a period of time the outsourcing experience lessens the cognitive limitations of decision-makers as to the advantages that can be achieved through outsourcing in low-cost countries: the insourcer/vendor may not only offer cost advantages, but also quality improvement and innovation. The quality improvements that offshore outsourcing may bring about evoke a realization in the corporation that even innovative processes can be outsourced.

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Bibliographic Info

Paper provided by DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies in its series DRUID Working Papers with number 05-17.

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Date of creation: 2005
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Handle: RePEc:aal:abbswp:05-17

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Web page: http://www.druid.dk/

Related research

Keywords: Offshore outsourcing; cost reduction; innovation; experiential learning; low-cost countries;

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  1. Warren J Bilkey & George Tesar, 1977. "The Export Behavior of Smaller-Sized Wisconsin Manufacturing Firms," Journal of International Business Studies, Palgrave Macmillan, vol. 8(1), pages 93-98, March.
  2. Fletcher, Richard, 2001. "A holistic approach to internationalisation," International Business Review, Elsevier, vol. 10(1), pages 25-49, February.
  3. Graf, Michael & Mudambi, Susan M., 2005. "The outsourcing of IT-enabled business processes: A conceptual model of the location decision," Journal of International Management, Elsevier, vol. 11(2), pages 253-268, June.
  4. Nayyar, Deepak, 1978. "Transnational Corporations and Manufactured Exports from Poor Countries," Economic Journal, Royal Economic Society, vol. 88(349), pages 59-84, March.
  5. Hirsch, Seev, 1976. "An International Trade and Investment Theory of the Firm," Oxford Economic Papers, Oxford University Press, vol. 28(2), pages 258-70, July.
  6. Otto Andersen, 1993. "On the Internationalization Process of Firms: A Critical Analysis," Journal of International Business Studies, Palgrave Macmillan, vol. 24(2), pages 209-231, June.
  7. Cavusgil, S. Tamer, 1984. "Differences among exporting firms based on their degree of internationalization," Journal of Business Research, Elsevier, vol. 12(2), pages 195-208, June.
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