This study investigates estimation errors due to hidden costs-the costs of implementation that are neglected in strategic decision-making processes-in the context of services offshoring. Based on data from the Offshoring Research Network, we find that decision makers are more likely to make cost-estimation errors given increasing configuration and task complexity in captive offshoring and offshore outsourcing, respectively. Moreover, we show that experience and a strong orientation toward organizational design in the offshoring strategy reduce the cost-estimation errors that follow from complexity. Our findings contribute to research on the effectiveness of sourcing and global strategies by stressing the importance of organizational design and experience in dealing with increasing complexity.

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Emerging economy multinationals (EMNEs) are catching up with advanced economy MNEs (AMNEs) even in emerging, high technology industries, where their knowledge‐based disadvantages are most severe. We explain this phenomenon by distinguishing between output and innovation capabilities. Successful EMNEs' focus on output capabilities need not facilitate innovation catch‐up. We compare the knowledge bases of an industry‐leading AMNE and a fast‐follower EMNE using patent data, buttressed by qualitative information. The AMNE's knowledge base is deeper and composed of more distinct technology groups than that of the EMNE. The EMNE has caught up in terms of output capabilities, but still lags in terms of innovation capabilities. Our in‐depth comparative case analysis contributes to the literature on knowledge strategies and their impact on firm capabilities.

Abstract:We investigate antecedents and contingencies of location configurations supporting global delivery models (GDMs) in global outsourcing. GDMs are a new form of IT-enabled client-specific investment promoting services provision integration with clients by exploiting client proximity and time-zone spread allowing for 24/7 service delivery and access to resources. Based on comprehensive data we show that providers are likely to establish GDM configurations when clients value access to globally distributed talent pools and speed of service delivery, and in particular when services are highly commoditized.Findings imply that coordination across time zones increasingly affects international operations in business-to-business and born-global industries.

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