Determinants of the Mode of Offshoring of Services by Large US Corporations PDF Download

Author: Anand Pore
Publisher:
ISBN:
Category : Contracting out
Languages : en
Pages : 211

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Book Description
This study explores the effects of service characteristics, firm capabilities, strategic motives and concerns on mode of offshoring of services of large US corporations. Firms could offshore services through a wide spectrum of modes ranging from i) complete internalization (foreign subsidiary), to ii) complete externalization (arms length transactions), or iii) intermediate modes (such as licensing, joint venture etc). Although, factors such as cost savings, time savings, host country incentives, access to skilled resources and markets may motivate firms to engage in offshoring of services; concerns regarding security/privacy of data, intellectual property rights, host country political/economic uncertainty, cultural distance between the host country and the home country and lack of partners/vendors in the host country may discourage firms from either offshoring services completely or may limit the choice of offshoring modes available to the firm in the host country. Also, factors related to the service such as strategic importance of the service to the firm, customization needs of the customer and use of proprietary technology in the production/performance of the service and firm capabilities may play a part in deciding the mode of offshoring. All these factors related to the service characteristics, firm capabilities, motives and concerns are used to build a model to explain the modal choice of offshoring of services of large US corporations. Survey data, regarding the above mentioned factors for firms involved in offshoring of services, was collected to empirically test the model. The model was tested using multinomial, binomial and ordinal regression. Results of the study support the influence of the strategic importance of the service, proprietary technology and cost savings motive on the mode of offshoring. In addition, firm's concerns regarding security/privacy of data, host country political/economic uncertainty, and lack of partners/vendors in the host country were also found to influence the offshoring mode. But, firm's motives of time savings, accessing host country skills and market and taking advantage of host country incentives were not found to influence the offshoring mode. Moreover, firm capabilities and firm's concerns over intellectual property protection and cultural distance were also not found to influence the mode of offshoring.