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Structure offshoring and returns on offshoring

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Abstract

Focusing on global offshoring, this paper adapts the dynamic capabilities perspective to analyze how the structuring of offshoring disaggregation and geographical dispersion affects firm performance. While previous studies show that the returns on offshoring remain unclear, we present three findings that explain how the structuring of offshoring disaggregation and geographical dispersion influences firm performance. First, the larger the level of offshoring disaggregation, the better the firm performs. Second, the more geographical dispersion, the better the firm performs. Third, the effect of offshoring disaggregation on firm performance is greater when the firm structures and offshores its disaggregated value chain activities to dispersed locations. While economies of scale and learning may guide firms to offshore many discrete activities of the value chain, firms are able to gain the most returns from the structuring of offshoring disaggregation when they reconfigure lots of offshoring projects implemented in dispersed locations where environmental dynamism concurs.

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Notes

  1. Offshoring connotes sourcing products or services from either a foreign-based supplier that is independent of the domestic firm (outsourced operation) or a foreign-based subsidiary of the firm whose home country is where the headquarter is located (captive operation).

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Acknowledgments

The authors would like to acknowledge the Ministry of Science and Technology in Taiwan and its funding for this research, and the ORN at Duke University and its release of the data. The authors thank Senior Editor Jane W. Lu, two anonymous reviewers, Arie Y. Lewin, and Gwendolyn K. Lee for insightful comments and valuable suggestions on this paper.

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  1. College of Management, Yuan Ze University, Taoyuan, Taiwan

    Yi-Ju Lo

  2. Management and Global Business, Rutgers Business School, New Brunswick and Newark, NJ, USA

    Tung M. Hung

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Lo, YJ., Hung, T.M. Structure offshoring and returns on offshoring. Asia Pac J Manag 32, 443–479 (2015). https://doi.org/10.1007/s10490-014-9405-9

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