Designing Global Sourcing Strategy for Cost Savings and Innovation: A Configurational Approach PMC

The primary focus of OS is to ensure that current organizational demands would not jeopardize future generations’ priorities. Various programs have been launched in this regard to promote sustainable consumerism and industrial practices (Keskin et al., 2013). Finally, our study sheds light on the inconsistent research findings and ongoing debate on the role of governance mode on the success of global sourcing (e.g., Hutzschenreuter et al. 2011b; Rodríguez and Nieto 2016; Roza et al. 2011). By considering the combined effect, rather than the net effect, of governance mode and other aspects of global sourcing configuration, we are able to provide a better explanation of how the level of control influences the outcome and performance of global value sourcing activities.

At the same time, high market competition forces the companies to struggle for each client by way of improving the quality of their goods and services and reducing their price. Historically, outsourcing was first recognized as a business strategy in 1989. Regularly used throughout the 1990s, the outsourcing tool has been firmly integrated into world business processes.

Is offshoring dead? A multidisciplinary review and future directions

In addition, if a company is reliant on a supplier that has a monopoly in the industry, that supplier will be able to dictate the terms (which could mean setting higher rates). A company that is vertically integrated can avoid suppliers with a lot of market power. Companies should look for an outsourcing provider who invests the time to understand the internal business culture of a client and the management style of engineering and creative teams. This strong relationship enables IT staffing companies to offer the best company-specific staffing solutions while remaining adaptable (due to ongoing client/vendor dialogue) to anticipate and address a company’s future personnel needs.

• Blau’s index of diversity is a well-known measure of diversity and has been used in many studies examining organizational dispersion (e.g., Lahiri 2010).
• This significantly increases productivity and decreases product and service turnaround time.
• More specifically, Configuration 2a requires the presence of geographical dispersion while Configuration 2b requires the presence of cultural dispersion.
• _____ is when a firm moves activities and jobs outside its home country.
• Outsourcing is a strategic decision made by a company to reduce costs and increase efficiency by hiring another person or company to perform tasks, provide services, or handle operations..
• Instead of the new HR proficiency of leadership and internal consulting, they focus their development operations on inward-facing personal proficiencies.
• Many large corporations have eliminated their entire in-house customer service call centers, outsourcing that function to third-party outfits located in lower-cost locations.

Third, fsQCA utilizes an inductive research method based on the principle of equifinality, assuming that multiple paths to a desired outcome can co-exist (i.e., more than one solution to the problem) (Fiss 2007). For example, Douglas et al. (2020) demonstrate how fsQCA complements the correlational methods and reveal complexity and heterogeneity of relationships in entrepreneurial phenomena. Greckhamer (2016) takes the configurational approach to reveal the fine-grained detail about casual asymmetry in CEO compensation. In essence, we argue that high performing global sourcing configurations are driven not only by specific elements but also the alignment among these three components to ensure that they work synchronously toward the expected outcome. We examine the global sourcing configurations of 235 firms engaging in global sourcing of business service activities.

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Where p is the proportion of a firm’s geographical distance from its headquarters to offshore location i to total distance to all offshore locations, and N is the total number of a firm’s offshore locations. Blau’s index of diversity is a well-known measure of diversity and has been used in many studies examining organizational dispersion (e.g., Lahiri 2010). Meta-analysis allows empirical aggregation across https://www.globalcloudteam.com/ studies that demonstrate mixed or conflicting results. Such syntheses allow for arriving at empirical generalization and knowledge enhancement on a topic of interest (Combs et al., 2019, Humphrey, 2011). We use a total of 106 primary studies containing 121 effect sizes based on 239,225 firm-level observations from 28 years of literature (1992 to 2019) on outsourcing-firm performance relationship.

D. Vertical integration allows firms to increase operational efficiencies through improved coordination of adjacent value chain activities. Vertical integration allows firms to increase operational efficiencies through improved coordination of adjacent value chain activities. C. The transaction costs that arise are frequently due to transfer prices. The transaction costs that arise are frequently due to transfer prices. When the internal costs involved in pursuing an activity in-house are more than the costs of transacting, then the concerned firm should vertically integrate.

Sales Operations

The world economy and business are endlessly developing, inventing new forms and methods of business processes arrangement. Built new core competencies to protect and extend its current market position. Redeployed and recombined core competencies to compete in markets of the future.

Our findings also contribute to the theoretical tension in global sourcing research and extend an understanding of heterogeneity in the performance of global sourcing activities. We have shown that the performance of global sourcing is determined not only by a single component of global sourcing configuration (disaggregation, dispersion, or governance structure), but also the interaction between these components. Accordingly, future research should take into account the interplay among disaggregation, dispersion and governance structure to accurately understand global sourcing activities and their outcome. Further, governance decisions—outsourcing versus captive—are mainly examined from the transaction cost economics lens (Gereffi et al. 2005; Hutzschenreuter et al. 2011a; Nieto and Rodríguez 2011). We propose here a need for global sourcing research to incorporate all three components—disaggregation, geographical dispersion, and organizational dispersion—of global sourcing configuration and take into account their joint effects on the global sourcing activities. This gap has left the search for an efficient global sourcing strategy fragmented and, hence, failed to yield the expected outcome.

The impact of offshoring on knowledge-intensive services: A study of activities in service production processes

Whereas, giant firms have been concentrating mainly on the development of operating systems (Sukitsch et al., 2015). There are certain ways through which organizations try to stay competitive. These include a search for a firm that engages in strategic outsourcing typically: sustainable practices and existing innovations in other markets (Falle et al., 2016). This can aid in better resource utilization and establish the circumstances for gaining a competitive advantage (Falle et al., 2016).

Global sourcing is shown to have a significant positive effect on the likelihood of firms to survive in globalized industries (Coucke and Sleuwaegen 2008) and firms’ performance (Mol et al. 2005). This can be attributed to the positive relationship between global sourcing and firms’ export and international sales (Bertrand 2011; Di Gregorio et al. 2009) as well as the positive effect of global sourcing on firms’ innovation (e.g., Lin et al. 2017; Nieto and Rodríguez 2011). When a company uses outsourcing, it enlists the help of outside organizations not affiliated with the company to complete certain tasks. The outside organizations typically set up different compensation structures with their employees than the outsourcing company, enabling them to complete the work for less money. This ultimately enables the company that chose to outsource to lower its labor costs.

International outsourcing of services: A partnership model

This could also lead to a sustainable organization in order to maintain its competitiveness among other business organizations. To fill this gap, this study tries to find the possible association of HR strategic outsourcing with organizational sustainability. To achieve this aim, several business organizations have sought ways to increase performance outside of their companies’ usual bounds. Companies are turning to strategic outsourcing to improve their competitive nature and enhance profitability (Marquis et al., 2015). Various studies have so far focused on the sustainability of firms from a theoretical perspective. A very few of these studies have focused on the application of sustainability principles to day-to-day business activities from the perspective of management (del Mar Alonso-Almeida et al., 2014; Huo et al., 2020).

While outsourcing has many upsides, it also has some risks that must be addressed (as already briefly discussed). Companies can reduce their financial exposure while increasing the efficiency of the outsourcing model they choose by understanding and mitigating these risks. Startups can be plagued by high turnover rates and often have to hire people for the same position multiple times a year. Outsourcing to remote teams reduces this headache, as well as accounts for work during holidays with the competitive prices of regions across southern Europe, such as Kosovo. Gain unlimited access to more than 250 productivity Templates, CFI’s full course catalog and accredited Certification Programs, hundreds of resources, expert reviews and support, the chance to work with real-world finance and research tools, and more.

Journal of International Management

We argue that this issue is primarily explained by the misalignment between a firm’s global sourcing strategy and value expected from its global sourcing activities. This study examines the role of global sourcing strategy on financial and innovation performance of global sourcing activities. The findings suggest that global sourcing strategy leading to high financial performance differs largely from global sourcing strategy leading to high innovation.