Abstracts
Session 1: THEORETICAL FRANCHISES:
INTERNATIONAL OUTSOURCING OF SERVICES
International Outsourcing of Services: Winners, Losers, and Strategies
Stephen Tallman, University of Richmond
Abstract: This paper considers the different types of International Outsourcing of Services that might be undertaken by business firms and addresses the costs and benefits of each for involved parties. The transactional costs of providing knowledge-based services at a distance are declining rapidly while the production costs are lower and quality of work as high or higher for such services in various emerging markets as compared to industrial nations. As firms are increasingly able to separate the physical and the informational aspects of business services and the commodity from the specialized in the information side of services, international outsourcing of commodity information-based services are expected to increase.
International Outsourcing of Services: A Partnership Model
Ben Kedia and Somnath Lahiri, University of Memphis
Abstract: The business landscape is currently witnessing widespread migration of service functions from developed nations like the U.S to several foreign destinations as India , China , Ireland etc. where cost of skilled labor is much lower. This happens as more and more firms engage in international outsourcing of services (IOS) to survive in today's highly competitive business environment. Despite its current and anticipated future growth, the practice of IOS and the nature of partnerships involved therein have not received adequate attention in the scholarly literature. In this paper, we explain the importance of IOS as a research domain, and develop a model that explains different types of IOS partnership. The model provides a way for researchers and practitioners to have a more comprehensive approach to partnership decisions. We conclude with a discussion of the research and managerial implications.
Institutional Factors Affecting Offshore Business Process and Information Technology Outsourcing
Nir Kshetri, University of North Carolina at Greensboro
Abstract: Micro and macro level impacts of offshore outsourcing are far from clear. Thus there are some well-founded rationales for and against offshore outsourcing as well as a number of misinformed and ill guided viewpoints. Using institutional theory as a lens, this paper analyzes the locus of global flow of offshore outsourcing of business process and information technology outsourcing. We examine the mechanisms by which regulative rules, social rules, culturally supported habits and subconsciously accepted rules and customs influence assessment, selection as well as continuation of outsourcing projects. Managerial and policy implications are also discussed.
Session 2: DISSECTING THE OUTSOURCING AGREEMENT
Contracting Costs in Outsourcing Partnerships:
An Investigation of Termination Provisions
Africa Arino, University of Navarra; Jeffrey Reuer, University of North Carolina; Kyle Mayer, University of Southern California; Joan Jane, Hewlett Packard-Spain
Abstract: We analyze the influence that the complexity of termination provisions and the existence of prior ties between partners have on outsourcing partnerships' contracting costs, as reflected in their negotiation time. We examine the dimensionality of the complexity of termination provisions, and the findings reveal distinct classes of termination provisions, the negotiation of which have differential effects on contracting costs. The evidence also indicates that prior ties have no direct influence on negotiation time, but they moderate the effects of negotiating termination provisions into outsourcing agreements.
International Offshoring of Services: A Parity Study
Kraiwinee Bunyaratavej, Arcadia University ; Eugene Hahn, Salisbury University ; Jonathan Doh, Villanova University
Abstract: Conventional wisdom suggests that firms engage in international offshoring of services primarily to reduce wage costs associated with a given service activity. Drawing on international business research on the costs of doing business abroad (CODBA), liability of foreignness (LOF), and institutional theory, we investigate the factors that contribute to the location choices for services offshoring activity, including wage differentials between the home and host countries. We find that consistent with a parity perspective but contrary to conventional expectations, a country is more likely to be a destination of services offshoring as the average wage of a country increases. We also find that education level and cultural similarity are significant drivers of offshoring location choices, again consistent with a parity perspective. This study contributes to debates about the economic impact of services offshoring by showing that firms locate offshoring facilities in destinations that are closer in wages to the home country and those with higher education levels and cultural similarity.
Trust and Formal Contracts in Outsourcing Relationships:
Substitutes and Complements
Thomas Mellewigt, University of Paderborn; Anoop Madhok, York University; Antoinette Weibel, University of Zurich
Abstract: We hypothesize that trust is a moderator of the direct relationship between control and coordination concerns and contractual complexity. Our results suggest that high trust weakens the positive relationship between control concerns and contractual complexity, but reinforces the positive relationship between coordination concerns and contractual complexity. By highlighting the dual role of contracts (i.e. a controlling and coordinating function) and the moderating role of trust in outsourcing relationships, our paper provides a new focus to the current discussion on the relationship between trust and contracts (i.e. substitutes or complements), one that may help reconcile some divergent perspectives in the literature.
Session 3: SERVICES OUTSOURCING: A FOCUS ON INDIA
Global Outsourcing of Electronically Traded White Collar Services:
Medical Transcription in India
Nikhilesh Dholakia, University of Rhode Island ; Nir Kshetri, University of North Carolina at Greensboro
Abstract: This paper integrates theories from international trade in services and e-commerce based on business process outsourcing (BPO) to explain the growth of the Indian medical transcription industry. In the burgeoning U.S. healthcare sector, enactment of the Health Insurance Portability and Accountability Act (HIPPA) escalated the demand for automation of medical records for insurance purposes. Medical transcription is one of the major functions in healthcare automation. Medical transcription being a peripheral activity for U.S. clinics and hospitals, they prefer to outsource this activity. With appropriate factor endowments for medical transcription as well as the right IT infrastructure, India has taken the lead in globally outsourced medical transcription. Using the Heckscher-Ohlin-Samuelson (HOS) theory of international trade, as well as BPO and e-commerce frameworks, our analysis indicates that India is positioned well vis-à-vis its Asian competitors as well as U.S.-based medical transcription services to grow its share of medical transcription outsourcing.
Globalization of Services and the Knowledge Process Outsourcing (KPO) Industry
Alok Aggarwal, Chairman, Evalueserve.com
Abstract: This research analyzes the evolution of a new trend in the global outsourcing industry termed Knowledge Process Outsourcing (KPO). It analyzes the evolving KPO market, the opportunities it offers, the associated challenges, and the key drivers associated with the transition from BPO to KPO. According to our estimate, the KPO market is expected to grow from USD 1.2 billion in FY 2003 to USD 17 billion in FY 2010. The research also forecasts the number of professionals who are likely to be employed by this industry along with presenting some important drivers behind the movement from BPO to KPO. Finally, this research attempts to compare countries (such as China , India , the Philippines , Ireland , Israel and Russia ) that can provide KPO services with respect to labor costs, geographic location, demographic factors and other miscellaneous factors.
When Outsourcing is not an Option:
International Relocation of Investment Bank Research
Michael Grote and Florian Taube, J.W. Geothe-University
Abstract: This paper analyzes two aspects of international sourcing strategies for investment banks' research: We look at possible reorganizations of research departments and location decisions contingent thereof. Intensified competition and re-regulation lead to increasing pressure on the costs of financial services firms, bringing sourcing strategies of core functions to the attention of top executives in investment banks. We use a value chain approach allowing for an integrated analysis of horizontal and vertical links to co-operating firms, customers, or other sources of information and knowledge. Two different research activities, i.e. country analysis and institutional equity analysis are examined. We draw on qualitative evidence from interviews with investment bank analysts as well as quantitative data on FDI by financial institutions. India , the predominant host country for offshoring activities in the financial sector, is used as a case study. The option of outsourcing certain stages of business processes and offshoring parts of the value chain within firms to low-wage locations depends crucially on how processes are ‘embedded' in relation to other departments within and to corresponding actors outside the bank. Our analysis shows that there is only limited potential for some research activities to be outsourced and relocated to low-cost regions with specific capabilities.
Session 4: CULTURAL INFLUENCES ON HOMESHORING
Elements of Offshore Service Ethnocentrism
Shawn Thelen, Hofstra University ; Tanya Thelen, Independent Consultant;
Vincent Magnini, Longwood University
Abstract: This paper presents a conceptual framework for the offshore service ethnocentrism construct. Based upon a series of in-depth interviews and a review of the extant literature, six dimensions that frame the construct are proposed: animosity towards companies that offshore positions, home country bias, animosity towards overseas service providers, discomfort with accents, security/privacy concerns, and propensity to support laws against offshoring. This manuscript expands the theoretical knowledge base of international services, provides insight into customer feelings about firms that offshore, describes reactions to offshore service providers, and assesses techniques companies can use to minimize negative responses by customers to offshoring. Lastly, managerial implications and suggestions for future research are provided.
International Sourcing of Services: The “HomeShoring” Alternative
Dustin Crane and Jim Stachura, Aelera Corporation;
Sheila Dalmat, Key Bridges Inc.; Rich Metters, Emory University
Abstract: The offshoring and outsourcing of service work from high-wage to low-wage countries has received considerable exposure in the popular press. Some have claimed that virtually all services that can be electronically transmitted should be offshored due to the extreme labor rate differentials. However, relatively little work has actually been offshored to date, largely due to cultural issues, fear of customer backlash, and hidden costs. Here, an alternative to offshoring is presented, called “HomeShoring.” In HomeShoring, a process is decoupled, just as it would be if it were offshored, but the work is sent to low wage areas within a country, rather than to another country. HomeShoring is done for the same reasons as offshoring, saving cost, and has many of the same drawbacks. HomeShoring does not represent merely “domestic sourcing,” as it implies a new relationship and duties of governmental economic development agencies. The benefits and disadvantages of this strategic choice are examined.
Implementation of Environmental Scanning and Environmental Change at the Functional Level: An Examination of Offshore Outsourcing
in the Financial Services Industry
Christopher Clott, Saint Xavier University
Abstract: The prevailing image that environmental scanning and interpretation of change is transmitted to CEO's or top management for use in strategic decision making takes little account of how environmental analysis is utilized at the implementation level. Using offshore outsourcing by U.S. and U.K. financial services organizations as a case in point, it is argued that scanning and interpretation efforts undertaken by mid-level managers in U.S. and U.K. financial services firms impact the degree of long-term success in implementing offshore outsourcing efforts. I propose that information on offshoring efforts emanates from a variety of sources- general media, customers, consultants, partner organizations, work groups, subordinates and their own experiences. It is hypothesized that mid-level managers are often not aware that new offshoring arrangements will involve potential far reaching long term effects including changing attitudes and behaviors in a disaggregated workplace. The research suggests that the interpretation of specific environmental changes as a result of offshoring may provide an insight into the long term development of firm strategy formulation