The attention stimulus of cultural differences in global services sourcing

Uncovering the role of cross-border strategic alliances and expertise decision centralization in enhancing product-service innovation in MMNEs

“…In addition, our evidence corroborates the predictions that cross-border service partnerships and captive service offshoring are strategic options that provide greater innovation outcomes than internal provision of services, whereas domestic partnerships do not seem to be associated with an innovation premium. This finding is important, as it upholds the literature emphasizing proximity to foreign clients (Jones & Wren, 2016;Peeters et al, 2015) and international knowledge sharing (Hansen et al, 2005;Hoetker, 2005), rather than the literature highlighting proximity between production and suppliers underlying economic geography debates (Jacobs et al, 2016;Lafuente et al, 2017). This result must be taken with caution, however, since our data contains few cases of the MMNE establishing partnerships with domestic KIBS.…”

“…Contrary to the internationalization rationale of traditional manufacturing firms based on lower production costs, servitized firms with clients overseas may need physical representation abroad to establish service provision geographically close to existent (or new) customers (Jones & Wren, 2016;Vendrell-Herrero, Gomes, Mellahi, & Child, 2017). This is important, as recent research has established that firms selling services abroad can save considerable costs by locating the service function in the client's country (Ghauri, Wang, Elg, & Rosendo-Ríos, 2016;Peeters, Dehon, & Garcia-Prieto, 2015). We thus expect that captive service offshoring will produce higher levels of product-service innovation than domestic internal provision of services.…”

Fragmenting global business processes: A protection for proprietary information

“…Fragmenting the business process has the opposite effect. It increases complexity and coordination costs (Contractor et al, 2010), especially when cognitive distance between the domestic and offshore country is high (Bertrand & Mol, 2013;Peeters, Dehon, & Garcia-Prieto, 2015). Reasons include the difficulty to decompose tasks and specify the best division of labor (Gulati & Singh, 1998), and the greater need for interaction and communication across sites (Kumar et al, 2009).…”

“…But there is wide evidence that firms tend to rush into sourcing decisions without deep understanding of the real benefits but also the true costs and risks of the particular country and model they have chosen (see for instance Peeters et al, 2015;Hennart & Slangen, 2014;Stringfellow et al, 2008). That is a cause of the well-known hidden cost problem .…”

“…Over time, experiential learning from previous and current international ventures would provide a key source of contextual and organizational knowledge. With experience, firms would then learn the true costs and risks of dispersing value chain activities and be better able to plan and implement new global sourcing initiatives (Jensen, 2009;Peeters et al, 2015). Specifically, experience in local institutions and their legal deficiencies (e.g., Gao & Pan, 2010) would help firms identify the location-specific antecedents of misappropriation risk and to increasingly deploy mitigation strategies to reduce that risk.…”