A technological contingency perspective on the depth and scope of international outsourcing

Abstract

In this study we present and test a technological contingency perspective on two dimensions of international outsourcing: depth and scope. The depth of international outsourcing refers to the ratio of foreign to total outsourcing. The scope of international outsourcing captures the degree of psychic dispersion between the country of operations and the countries a firm is outsourcing from. Using multiple regression analysis on a sample of 189 firms in the Netherlands, the effect of five technological contingency factors is measured: product innovation, technological and volume uncertainty, asset specificity, and the integration of the outsourcing function. A most interesting finding is that technological uncertainty and the degree of product innovation turn out to be both positively associated with a high scope/low depth type of international outsourcing and negatively associated with a low scope/high depth type of international outsourcing. The findings create a platform for a two-dimensional typology, which provides an explanatory logic for the expansion and development path of international outsourcing.

International R&D service outsourcing by technology-intensive firms: Whether and where?

“…First, they are increasing the range of activities along the value chain that are outsourced (Gilley & Rasheed, 2000;Hätonen & Eriksson, 2009;Hitt, Keats, & De Marie, 1998;Jacobides, 2005;Kotabe & Murray, 2004;Quinn & Hilmer, 1994) including areas that were traditionally vertically integrated, such as those related to the innovation process (Cesaroni, 2004;Gooroochurn & Hanley, 2007;Granstrand, Patel, & Pavitt, 1997;Howells, Gagliardi, & Malik, 2008;Leiblein, Reuer, & Dalsace, 2002;Manning, Massini, & Lewin, 2008;Narula, 2001;Quinn, 2000;Subramaniam & Venkatraman, 2001;Tsai & Wang, 2009;UNCTAD, 2005;Veugelers, 1997). Second, firms are increasingly outsourcing innovating activities offshore, not only to providers located in developed countries but also to those in developing ones (Bunyaratavej, Hahn, & Doh, 2007;Doh, 2005;Dossani & Kenney, 2007;Javalgi, Dixit, & Scherer, 2009;Jensen, 2009;Kedia & Mukherjee, 2009;Kotabe & Mudambi, 2009;Mol, Pauwels, Matthyssens, & Quintens, 2004;Mol, van Tulder, & Beije, 2005;Un, 2009). 3 As a consequence, the R&D function is being disintegrated into different technologically separable R&D services (Fosfuri & Roca, 2002;Gottfredson et al, 2005;Howells et al, 2008) that can be performed in different locations either by the firm or by an external contractor (Arora & Gambardella, 2005;Hirshfeld & Schmid, 2005;Levy, 2005;…”

Whether and What to Offshore?

“…Somewhat along the same lines as Linder et al (2003), Mol et al (2004) demonstrate how advanced business activities can go hand in hand with offshoring. The authors show that offshoring is positively linked to the level of product innovation.…”

Effects of Outsourcing on National Forest Plantation Development Programme in Ghana

“…According to (Hoetker, 2005) when innovative components are sourced, the technical level of the supplier is the critical criterion. Again, asset specificity according to (Mol et al, 2004) compels companies to seek for highly specialized supply sources and to assess supplier accordingly. It is also said that if the outsourcing does not require high skills from the supplier, then other criteria such as price becomes critical.…”