Strategic and Financial Performance Implications of Global Sourcing Strategy: A Contingency Analysis

Journal of Purchasing and Supply Management

2003

Abstract:Recently Ramsay (2001) applied the resource based view of the firm (RBV) to argue that purchasing is a largely irrelevant activity from a strategic management point of view. In this paper it will be argued to the contrary on several grounds. First, it will be shown there is a much wider theoretical base underlying the field of strategic management, from which arguments can be drawn to substantiate that purchasing can indeed have strategic impact. Second, recent developments in the RBV will be discussed to illustrate that also within the RBV purchasing is a strategic activity.Furthermore there is much empirical evidence to demonstrate that purchasing and supply management activities contribute to sustainable competitive advantage. The paper then puts forward a systematic set of criteria, which may be of value to purchasing management researchers to assess whether studied phenomena have strategic impact. Finally some hints are given for future research directions.

Section: Empirical Supportmentioning

confidence: 81%

Purchasing's strategic relevance

Journal of Purchasing and Supply Management

2003

“…In a meta-analysis, Capon, Farley, and Hoenig (1990) found that vertical integration was positively linked to performance in some cases and negatively in others. D'Aveni and Ravenscraft (1994) found that vertical integration has a moderately positive impact on performance, yet Murray, Kotabe, and Wildt (1995) found a positive relationship between the extent of external sourcing and financial performance (i.e., ROS, ROI and ROE). Then there are some studies pointing to no relationship at all.…”

Section: Outsourcing and Performancementioning

confidence: 99%

“…Rarely have they tried to integrate both arguments in their work. Two key exceptions are D'Aveni and Ravenscraft (1994) and Murray, Kotabe, and Wildt (1995) who look at both the positives and the drawbacks of outsourcing. However, neither study suggests a non-linear relationship.…”

Section: Hypothesis 1: There Is a Negative Curvilinear Relationship Bmentioning

confidence: 99%

Outsourcing and financial performance: A negative curvilinear effect

Kotabe

Journal of Purchasing and Supply Management

2009

Self Cite

This study asks how a firm's degree of outsourcing across all activities influences financial performance. We argue there is an optimal degree of outsourcing, where firms outsource some activities yet integrate others, and that deviations lower performance in a negatively curvilinear fashion. We find empirical support, using 1995 and 1998 data on a sample of manufacturing businesses in the Netherlands, and show that the steepness of the curve increases under conditions of high uncertainty. We show the magnitude of the uncertainty effect on performance outcomes through a post hoc scenario analysis. Thus we provide a specific, theoretically and empirically grounded prediction of how outsourcing affects performance with implications for theory and practice.

“…Some studies have shown, however, that despite, or maybe, as a result of those operational problems, where to source major components seems much less important than how to source them (Kotabe & Swan, 1994;Mol, van Tulder, & Beije, 2005;Murray, Kotabe, & Wildt, 1995). Thus, when examining the relationship between sourcing and competitiveness of multinational companies, it is crucial to distinguish between insourcing and outsourcing, for these two types of sourcing will have a different impact on their long-term competitiveness.…”

Section: Global Sourcing Strategymentioning

confidence: 99%

Outsourcing, performance, and the role of e-commerce: A dynamic perspective

Kotabe

Industrial Marketing Management

Murray

2008

Self Cite

100

In a highly competitive global environment, many manufacturers respond by setting up outsourcing relations for components and finished products with lower-cost producers on a contractual OEM (original equipment manufacture) basis. In the last decade, we have witnessed a spectacular growth in outsourcing activities led primarily by U.S. and Japanese companies, although their approaches to outsourcing strategy and supplier relations are different. However, outsourcing strategy is not without drawbacks. We offer a dynamic perspective of outsourcing strategy and its performance implications, in which we argue that there is an optimal degree of outsourcing. The outsourcing-performance relationship takes on an inverted-U shape, implying that as firms deviate further from their optimum degree of outsourcing, by either insourcing or outsourcing too much, their performance will suffer disproportionately. We then discuss how e-commerce affects where the optimum point of any particular firm is located, hence explicitly linking developments in ecommerce to changing outsourcing levels. We provide implications for the practice and study of outsourcing and e-commerce.