Skip to main content
  • Get access
    Check if you have access via personal or institutional login
  • Cited by 2
  • Cited by
    This chapter has been cited by the following publications. This list is generated based on data provided by CrossRef.

    Berry, Heather 2018. The Influence of Multiple Knowledge Networks on Innovation in Foreign Operations. Organization Science, Vol. 29, Issue. 5, p. 855.

    Bertrand, Olivier and Capron, Laurence 2015. Productivity enhancement at home via cross-border acquisitions: The roles of learning and contemporaneous domestic investments. Strategic Management Journal, Vol. 36, Issue. 5, p. 640.

  • Print publication year: 2010
  • Online publication date: January 2011

1 - Global outsourcing and offshoring



The activities of any enterprise can be broken down into a large number of discrete steps along its value chain, from research and design, to production, marketing and distribution, to customer service. Even these are but broad categories which can be micro-dissected into their component pieces. For instance, the “research” function can include creative design, requiring high technical skills and intelligent market feedback into the design process. But research also entails several mundane activities such as field testing, patent applications, and data compilation.

This chapter deals with three broad trends affecting the reconfiguration of company functions, for which we propose an integrated approach for theory and strategy:

(a) The increasingly finer micro-dissection of company functions all along the value chain. This enables a finer-grained evaluation of which of the micro-activities are best performed within the company, and which may be outsourced – in short, the organizational relocation of functions which previously may have been performed in-house.

(b) Geographical relocation and the choice of foreign country and partner.

(c) The greater outsourcing and offshoring of activities that used to be considered “core,” proprietary, or strategically crucial, such as Research and Development vital to the continued competitiveness of the firm.

The chapter addresses a crucial global strategy question, “What is the optimal global and organizational configuration for each micro-activity or function for a company?”

Although the driving forces of outsourcing and offshoring have recently escalated, the roots of geographical and organizational restructuring of economic activity can be traced back into prehistory.

Recommend this book

Email your librarian or administrator to recommend adding this book to your organisation's collection.

Global Outsourcing and Offshoring
  • Online ISBN: 9780511761607
  • Book DOI:
Please enter your name
Please enter a valid email address
Who would you like to send this to *
Alcacer, J. and Chung, , , W. 2002. “Knowledge seeking and location choice of foreign direct investment in the United States,” Management Science 48(12): 1534–54.
Alcacer, J. and Chung, , , W. 2007. “Location strategies and knowledge spillovers,” Management Science 53(5): 760–76.
,Associated Press. 2007. “One in five IBM employees now in India,” December 16, available at,2933,317002,00.html.
Azoulay, P. 2004. “Capturing knowledge within and across firm boundaries: evidence from clinical development,” American Economic Review: 1591–612.
Balconi, M., Pozzali, A., and Viale, R. 2007. “The ‘codification debate’ revisited: a conceptual framework to analyze the role of tacit knowledge in Economics,” Industrial and Corporate Change 16(5): 823–49.
Barney, J.B. 2001. “Resource-based theories of competitive advantage: a ten-year retrospective on the resource-based view,” Journal of Management 27(6): 643–50.
Barthelemy, J. 2001. “The hidden costs of IT outsourcing,” MIT Sloan Management Review 42(3): 60–69.
Barthelemy, J. 2003. “The seven deadly sins of outsourcing,” The Academy of Management Executive 17(2): 87–98.
Belderbos, R. 2003. “Entry mode, organizational learning, and R&D in foreign affiliates: evidence from Japanese firms,”Strategic Management Journal 24: 235–59.
Bhandari, B. 2009. “Frugal innovation,” Business Standard, June 13, (accessed August 12, 2009).
Blinder, A. 2006. “Offshoring: the next industrial revolution?” Foreign Affairs 85(2): 113–28.
Boddewyn, J., Halbrich, M., and Perry, A. 1986. “Service multinationals: conceptualization, measurement and theory,” Journal of International Business Studies 17(3): 41–58.
Bunyaratavej, K., Hahn, E., and Doh, J. 2007. “International offshoring of services: a parity study,” Journal of International Management (13): 7–21.
Cantwell, J.A. and Mudambi, R. 2005. “MNE competence-creating subsidiary mandates,” Strategic Management Journal 26: 1109–28.
,Cargonews Asia. 2009. “787 woes force Boeing acquisition,” July 8,
Chesbrough, H.W. 2007. “Why companies should have open business models,” MIT Sloan Management Review 48(2): 22–28.
Chesbrough, H.W. and Teece, D.J. 2002. “Organizing for innovation: when is virtual virtuous?” Harvard Business Review 80(9): 127.
Cockburn, Iain M. 2004. “The changing structure of the pharmaceutical industry,” Health Affairs 23(1) (Jan.–Feb.): 10–22.
Contractor, F. and Lorange, P. 2002. “The growth of alliances in a new knowledge-based economy,” in Contractor, and Lorange, (eds.), Cooperative Strategies and Alliances. Oxford: Elsevier.
Contractor, F. and Mudambi, S. 2008. “The influence of human capital investment on the exports of services and goods: an analysis of the top 25 services outsourcing countries,” Management International Review 48(4).
Contractor, F. and Ra, W. 2002. “How knowledge attributes influence alliance governance choices,” Journal of International Management 8: 11–27.
Contractor, F. and Woodley, J. 2009. “The influence of asymmetric bargaining power, mutual hostages and task characteristics on the governance structure of cross-border technology alliances,” International Journal of Technology Management 48(3): 403–22.
Dedrick, J. and Kraemer, K. 2007. “Personal Computing,” in Mowery, and Macher, , pp. 19–42.
Doshi, K. 2004. “Pharmaceutical outsourcing: the next wave,” Indian Journal of Economics and Business, Special Issue on Outsourcing: 125–35.
Dosi, G., Malerba, F., Ramello, G., and Silva, F. 2006. “Information, apropriability, and the generation of innovative knowledge four decades after Arrow and Nelson: an introduction,” Industrial and Corporate Change 15(6): 891–901.
Dossani, R. and Kenney, M. 2004. “The next wave of globalization? Exploring the relocation of service provision to India” Working Paper 156, September 13, Berkeley Roundtable on the International Economy University of California at Berkeley.
Dossani, R. and Kenney, M. 2006. “Reflections upon sizing the emerging global labor market,” Academy of Management Perspectives 20: 35–41.
Dunning, J.H. 1998. “Location and the multinational enterprise: a neglected factor?” Journal of International Business Studies 29(1): 45–66.
Dyer, J.H. and Singh, H. 1998. “The relational view: cooperative strategy and sources of interorganizational competitive advantage,” Academy of Management Review 23: 660–79.
Earley, P.C. and Mosakowski, E. 2000. “Creating hybrid team cultures: an empirical test of transnational team functioning,” The Academy of Management Journal 43(1): 26–49.
Farrell, D. 2006. “Smarter offshoring,” Harvard Business Review (June): 85–92.
Flores, R.G. and Aguilera, R.V. 2007. “Globalization and location choice: an analysis of US multinational firms in 1998 and 2000,” Journal of International Business Studies 38(7): 1187–210.
Florida, R. 2005. The Flight of the Creative Class: The New Global Competition for Talent. New York: Harper Collins.
Getz, Kenneth A. 2007. “CRO shifts in the outsourcing market,” Applied Clinical Trials,
Gottfredson, M., Puryear, R., and Phillips, S. 2005. “Strategic sourcing: from periphery to the core,” Harvard Business Review (Feb.): 132–39.
Granstrand, O., Patel, P., and Pavitt, K. 1997. “Multitechnology corporations: why they have ‘distributed’ rather than ‘distinctive core’ capabilities,” California Management Review 39(4): 8–25.
Hindin, Toby. 2004. “Looking back, moving forward: a CRO retrospective,” Applied Clinical Trials, http:// Date=&pageID=2 (accessed June 19, 2009).
Hinds, P. and Bailey, D. 2003. “Out of sight, out of sync: understanding conflict in distributed teams,” Organization Science 14(6): 615–32.
Holcomb, T.R. and Hitt, M.A. 2007. “Toward a model of strategic outsourcing,” Journal of Operations Management 25(2): 464–81.
Kale, P. and Singh, H. 2009. “Managing strategic alliances: what do we know now, and where do we go from here?” Academy of Management Perspectives (Aug.): 45–62.
Karmarkar, U. 2004. “Will you survive the services revolution?” Harvard Business Review: 101–07.
Kenney, M. 2007. “The knowledge workforce in the global economy: some thoughts” (luncheon presentation prepared for the Workshop on Research Evidence related to Future Skill Demands, National Academy of Sciences, Washington, DC (May 31–June 1),
Klein, B. 1996. “Why hold-ups occur: the self-enforcing range of contractual relationships,” Economic Inquiry 34: 444–63.
Kleyn, D., Kitney, R., and Atun, R. 2007. “Partnership and innovation in the life sciences,” International Journal of Innovation Management 11(2): 323–47.
Kuemmerle, W. 1997. “Building effective R&D capabilities abroad,” Harvard Business Review 75(2): 61–70.
Langlois, R. 2003. “The vanishing hand: the changing dynamics of industrial capitalism,” Industrial and Corporate Change 12(2): 351–85.
Levy, T. 2003. “Chalcolithic” – entry in Encyclopedia of Prehistory: South and Southwest Asia, ed. Peregrine, P. and Ember, M.. Dordrecht: Kluwer Academic.
Lewin, A. and Furlong, S. 2005. Duke University CIBER/Archstone Consulting 1st Bi-Annual Offshore Survey Results (March).
Manning, S. 2008. “Customizing clusters: on the role of western multinational corporations in the formation of science and engineering clusters in emerging economies,” Economic Development Quarterly 22(4): 316–23.
Manning, S., Massini, S., and Lewin, A. 2008. “A dynamic perspective on next-generation offshoring: the global sourcing of science and engineering talent,” Academy of Management Perspectives 22(3): 35–54.
,McKinsey Global Institute. 2003. Offshoring – Is It a Win-Win Game? (Aug.),
,McKinsey Global Institute 2007. The Emerging Global Labor Market (April),
,McKinsey Global Institute 2009. Changing the Fortunes of America's Workforce: A Human Capital Challenge (June),
Mol, M., Pauwels, P., Matthyssens, P., and Quintens, L. 2004. “A technological contingency perspective on the depth and scope of international outsourcing,” Journal of International Management 10: 287–305.
Mowery, D. and Macher, J. 2007. Innovation in Global Industries: US Firms Competing in a New World. Washington, DC: National Research Council.
,National Science Foundation. 2009. Science and Engineering Indicators, 2008. Arlington, VA: National Science Foundation.
Nichols-Nixon, C. and Woo, C. 2003. “Technology sourcing and output of established firms in a regime of encompassing technological change,” Strategic Management Journal 24(7): 651–66.
Palmisano, S. 2006. “The globally integrated enterprise,” Foreign Affairs 85(3): 127–36.
Patel, P. and Vega, M. 1999. “Patterns of internationalization of corporate technology: location vs. home country advantages,” Research Policy 28: 145–55.
Prahalad, C.K. and Hamel, G. 1990. “The core competence of the corporation,” Harvard Business Review 68(3): 79–91.
Rothaermel, F., Hitt, M., and Jobe, L. 2006. “Balancing vertical integration and strategic outsourcing: effects on product portfolio, product success, and firm performance,” Strategic Management Journal 27(11): 1033–56.
Sanchez, R. and Mahoney, J. 1996. “Modularity, flexibility, and knowledge management in product and organization design,” Strategic Management Journal 17 (Winter Special Issue): 63–76.
Sen, F. and Shiel, M. 2006. “From business process outsourcing (BPO) to knowledge process outsourcing (KPO): some issues,” Human Systems Management 25: 145–55.
Sjölander, S. and Granstrand, O. 1990. “Managing innovation in multitechnology corporations,”Research Policy 19.
Sorenson, O., Rivkin, J.W., and Fleming, L. 2006. “Complexity, networks and knowledge flow,” Research Policy 35: 994–1017.
Sutton, J. 2004. “The auto-component supply chain in China and India – a benchmark study,” Working Paper No. E134, London School of Economics, Feb., (accessed August 7, 2009).
Tadelis, S. 2007. “The innovative organization: creating value through outsourcing,” California Management Review 50(1): 261–77.
Takeishi, A. 2001. “Bridging inter- and intra-firm boundaries: management of supplier involvement in automobile product development,” Strategic Management Journal 22(5): 403–33.
Teece, D.J. 1992. “Competition, cooperation, and innovation: organizational arrangements for regimes of rapid technological progress,” Journal of Economic Behavior & Organization 18(1): 1–25.
Un, C., Cuervo-Cazurra, A., and Asakawa, K. 2008. “R&D Collaborations and Product Innovation,” Working Paper. Moore School of Business, University of South Carolina, posted at SSRN,
,UNCTAD. 2002. World Investment Report: Transnational Corporations and Export Competitiveness. New York and Geneva: United Nations.
,UNCTAD 2004. World Investment Report: The Shift Towards Services. New York and Geneva: United Nations.
,UNCTAD 2005. World Investment Report. New York and Geneva: United Nations.
Biesebroeck, J. 2003. “Wages equal productivity: fact or fiction?” National Bureau of Economic Research, Working Paper 10174,
Wadhwa, V. and Gereffi, G. 2005. Framing the Engineering Outsourcing Debate, SSRN Paper (revised 2008),
Williamson, Oliver. 1975. Markets and Hierarchies: Analysis and Antitrust Implications. New York: Macmillan.
,WTO. 2009. World Trade Statistics, 2009. Geneva: World Trade Organization.
Zaheer, S. and Zaheer, A. 2001. “Market microstructure in a global B2B network,” Strategic Management Journal 22(9): 859–73.
Zeithaml, V., Parasuraman, A., and Berry, L. 1985. “Problems and strategies in services marketing,” Journal of Marketing 49(Spring): 33–46.