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Failing to estimate the costs of offshoring: A study on process performance

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  • Larsen, Marcus M.

Abstract

This article investigates cost estimation errors in the context of offshoring. It is argued that an imprecise estimation of the costs related to implementing a firm activity in a foreign location has a negative impact on the process performance of that activity. Performance is deterred as operations are likely to be disrupted by managerial distraction and resource misallocation. It is also argued that this relationship is mitigated by the extent to which firms use modularity to coordinate the activity but worsened by the extent to which ongoing communication is used. The results, based on a hierarchical regression analysis of a unique survey on Danish and Swedish firms, support these arguments.

Suggested Citation

  • Larsen, Marcus M., 2016. "Failing to estimate the costs of offshoring: A study on process performance," International Business Review, Elsevier, vol. 25(1), pages 307-318.
  • Handle: RePEc:eee:iburev:v:25:y:2016:i:1:p:307-318
    DOI: 10.1016/j.ibusrev.2015.05.008
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    3. Guo, Jingjing & Guo, Bin & Zhou, Jianghua & Wu, Xiaobo, 2020. "How does the ambidexterity of technological learning routine affect firm innovation performance within industrial clusters? The moderating effects of knowledge attributes," Technological Forecasting and Social Change, Elsevier, vol. 155(C).
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    5. Wieland, Andreas & Bals, Lydia & Mol, Michael J. & Handfield, Robert B., 2020. "Overcoming blind spots in global sourcing research: Exploiting the cross-sections between supply chain management and international business," Journal of International Management, Elsevier, vol. 26(1).
    6. Patel, Pankaj C. & Parida, Vinit & Jayaram, Jayanth & Oghazi, Pejvak, 2018. "Task equivocality and process modularity in R&D offshore collaboration projects," Journal of Business Research, Elsevier, vol. 93(C), pages 12-22.
    7. Razika Malek & Qing Yang, 2023. "Analyzing Interrelationships and Prioritizing Performance Indicators in Global Product Development: Application in the Chinese Renewable Energy Sector," Sustainability, MDPI, vol. 15(14), pages 1-26, July.
    8. Mol, Michael J. & Brandl, Kristin, 2018. "Bridging what we know: The effect of cognitive distance on knowledge-intensive business services produced offshore," International Business Review, Elsevier, vol. 27(3), pages 669-677.
    9. Meissner, Dirk & Burton, Nicholas & Galvin, Peter & Sarpong, David & Bach, Norbert, 2021. "Understanding cross border innovation activities: The linkages between innovation modes, product architecture and firm boundaries," Journal of Business Research, Elsevier, vol. 128(C), pages 762-769.
    10. McIvor, Ronan & Bals, Lydia, 2021. "A multi-theory framework for understanding the reshoring decision," International Business Review, Elsevier, vol. 30(6).
    11. Alina Grecu & Wolfgang Sofka & Marcus M. Larsen & Torben Pedersen, 2022. "Unintended signals: Why companies with a history of offshoring have to pay wage penalties for new hires," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(3), pages 534-549, April.
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