Selecting the governance mode when offshoring knowledge-intensive activities

• Published in: Journal of purchasing and supply management 2018-10, Vol.24 (4), p.275-287
• Main Authors: Paz-Aparicio, Carmen, Muñoz-Bullón, Fernando, Sanchez-Bueno, Maria J., Ricart, Joan E.
• Format: Article
• Language: English
• Subjects: Captive offshoring; International sourcing; Offshore outsourcing; Offshoring drivers; Offshoring governance modes; Offshoring knowledge-intensive activities
• ISSN: 1478-4092; 1873-6505
• DOI: 10.1016/j.pursup.2018.10.001

The offshoring phenomenon has evolved in recent years, and can be understood from a threefold perspective: first, the evolution in the type of activity being offshored; second, the learning curve involving both the companies implementing offshoring and service providers; and third, the reasons for offshoring. This study proposes an empirical framework that will allow us to explore the interaction between the type of activity (specifically knowledge-intensive) and the drivers of the decision to select the most appropriate governance mode. Specifically, our results show that market-seeking drivers become the primary determinants prompting firms to offshore knowledge-intensive activities through a captive center. In contrast, the motivation to reduce costs moderates the decision to offshore knowledge-intensive activities by nurturing a preference for offshore outsourcing. The empirical evidence is supported by multi-country data from the Offshoring Research Network. •The evolution of the offshoring phenomenon comes from a threefold perspective.•We propose an empirical model to understand the decision to offshore K-I activities.•Market-seeking drivers are determinants for firms to captive offshore K-I activities.•Cost drivers promote a preference for offshore outsourcing K-I activities.•Empirical evidence is supported with the entire multi-country data from the ORN.