R&D (Re)location and Offshore Outsourcing: A Management Perspective

The paper reviews and systematizes the management literature directly and indirectly related to (re)location of research and development (R&D), in the form of both insourcing and outsourcing. The focus in particular is on R&D offshore outsourcing and its main drivers, including locational constraints and opportunities, motives, strategic decisions and managerial challenges. The analysis synthesizes and links the main propositions and findings of the theoretical and empirical work to build an original management and strategy centred framework which looks at R&D (re)location from a client–vendor perspective. In this case, the client is the offshoring company, and the vendors are the firms located in the host country. The characteristics of the firms and locations considered vis‐à‐vis the offshoring firm's goals are examined, the strategies implemented, the management and organizational challenges that R&D offshore outsourcing entails, and the ways in which offshoring impacts on both home and host locations are investigated.     

Supply Chain Strategy,Product Characteristics,and Performance Impact: Evidence from Chinese Manufacturers*

Supply chain management has become one of the most popular approaches to enhance the global competitiveness of business corporations today. Firms must have clear strategic thinking in order to effectively organize such complicated activities, resources, communications, and processes. An emerging body of literature offers a framework that identifies three kinds of supply chain strategies: lean strategy, agile strategy, and lean/agile strategy based on in‐depth case studies. Extant research also suggests that supply chain strategies must be matched with product characteristics in order for firms to achieve better performance. This article investigates supply chain strategies and empirically tests the supply chain strategy model that posits lean, agile, and lean/agile approaches using data collected from 604 manufacturing firms in China. Cluster analyses of the data indicate that Chinese firms are adopting a variation of lean, agile, and lean/agile supply chain strategies identified in the western literature. However, the data reveal that some firms have a traditional strategy that does not emphasize either lean or agile principles. These firms perform worse than firms that have a strategy focused on lean, agile, or lean/agile supply chain. The strategies are examined with respect to product characteristics and financial and operational performance. The article makes significant contributions to the supply chain management literature by examining the supply chain strategies used by Chinese firms. In addition, this work empirically tests the applicability of supply chain strategy models that have not been rigorously tested empirically or in the fast‐growing Chinese economy.     

The Role of Contracts on Quality and Returns to Quality in Offshore Software Development Outsourcing

In this study, we examine how the different incentive structures inherent in two primary contract types—time and materials (T&M) and fixed price (FP)—influence the quality provided by the vendor in the software development outsourcing industry. We argue that the incentive structure of FP contracts motivates a vendor to be more efficient in the software development process, which results in higher quality as compared to projects executed under a T&M contract. We thus argue that vendors consistently staff FP projects with better trained personnel because they face the most risk on these contracts, resulting in better outcomes on these projects. We extend our analysis to propose that providing higher quality is associated with higher profit margins for the vendor only for FP contracts. We develop and test these hypotheses on data collected from 100 software projects completed by a leading Indian offshore vendor. The results provide strong support for our fundamental thesis that the drivers of and returns to quality vary by contract type. We discuss the implications of our research for both researchers and practitioners.     

Systems Collaboration and Strategic Collaboration: Their Impacts on Supply Chain Responsiveness and Market Performance*

Recognizing the importance of interfirm collaboration and recent advancement of information technology (IT) to enhance joint decision making between firms, this study conceptualizes systems collaboration and strategic collaboration as two essential types of interfirm collaboration. The study then simultaneously examines the multiple roles of systems collaboration and strategic collaboration, and how they directly and indirectly influence a firm's supply chain responsiveness and market performance. Hypotheses are tested on survey data collected from 184 firms. Results suggest that the sequential relationships among IT competency, interfirm collaboration, and supply chain responsiveness have significant market performance implications.     

Managing Differentiation‐Integration Duality in Supply Chain Integration*

Existing research focuses on the positive returns to operational performance of firms’ supply chain integration (SCI) with suppliers, buyers, and customers. We draw on differentiation‐integration duality and contingency theory to suggest that manufacturing firms should seek to achieve both integration through supply chain coordination activities and differentiation through modularity‐based manufacturing practices (MBMP). Using a sample of 261 manufacturing firms, we identify an inverse U‐shaped relationship between SCI and operational performance. Furthermore, we find support for the importance of differentiation‐integration duality as a fit between high levels of SCI and high levels of MBMP results in enhanced operational performance. We find support for a contingency perspective as fit is especially critical at higher levels of environmental uncertainty. Implications for theory, practice, and further research are suggested.     

On Decisions for Integration Implementation: An Examination of Complementarities Between Product‐Process Technology Integration and Supply Chain Integration

Research has shown that both product‐process technology (PPT) integration and supply chain integration efforts produce operational benefits, yet synergies between these types of integration are not well understood. This article empirically examines strategic customer integration and supplier integration as complementary activities for PPT integration, with the aim of helping manufacturing plant managers to intelligently implement mutually supportive types of integration. We set two conditions for establishing complementarity: (i) one type of strategic integration must positively influence the adoption of another and (ii) the two types of strategic integration must exhibit a synergistic fit with respect to manufacturing plant capabilities. We test these conditions using survey results representing 224 manufacturing plants. The findings show positive complementarities between PPT integration and supplier integration with respect to quality, delivery, and process flexibility. Also, positive complementarities exist between PPT integration and customer integration with respect to quality and new product flexibility. The results extend the emerging theory of strategic value chain integration and provide guidance to manufacturing managers who wish to assemble strategic integration policies.     

Quality Management and Cooperative Values: Investigation of Multilevel Influences on Workgroup Performance

Unsuccessful quality initiatives often are attributed to an organizational culture that does not recognize the importance of the cooperative values that underlie “soft” quality management practices, like customer focus and empowerment. Yet, the literature remains unclear as to how quality management and cooperative values interrelate by failing to incorporate the multilevel influences on this relationship in organizations. This research analyzes a multilevel model based on sociotechnical systems and quality management theories. Secondary data are used to test an explanation of how organizational‐level and workgroup‐level quality management practices relate to cooperative cultural values and workgroup performance. A single‐level model is also tested to demonstrate its inadequacies. Based upon the support for a multilevel model, managerial insights are provided that aid in deciding where resources should be allocated during a quality initiative.     

A Knowledge Framework Underlying Process Management*

Organizations are increasingly implementing process‐improvement techniques like Six Sigma, total quality management, lean, and business process re‐engineering to improve organizational performance. These techniques are part of a process management system that includes the organizational infrastructure to support the improvement techniques. The knowledge‐based view of a firm argues that organizational knowledge is the source of competitive advantage. To the extent that the process management system enables knowledge creation it should be a source of competitive advantage. This study investigates the underlying framework and factors of a process management system that lead to organizational knowledge creation. Prior studies have considered knowledge creation in process improvement, but none have considered the role of the process management system. Specifically, the study uses the case study method to investigate multiple levels (organization level and project level) of two firms using Six Sigma as their chosen process management system. Analysis of the cases reveals that the leadership creates a supportive infrastructure enabling process‐improvement techniques to effectively create organizational knowledge. Interestingly, focusing on decision‐making tools and methods may not be effective without developing a supportive infrastructure. The proposed framework provides a basis for organizational leaders to think about how to design and implement a process management system to better enable knowledge creation in organizations.     

Knowledge Life Cycle,Knowledge Inventory,and Knowledge Acquisition Strategies*

For a knowledge‐ and skill‐centric organization, the process of knowledge management encompasses three important and closely related elements: (i) task assignments, (ii) knowledge acquisition through training, and (iii) maintaining a proper level of knowledge inventory among the existing workforce. Trade‐off on choices between profit maximization in the short run and agility and flexibility in the long term is a vexing problem in knowledge management. In this study, we examine the effects of different training strategies on short‐term operational efficiency and long‐term workforce flexibility. We address our research objective by developing a computational model for task and training assignment in a dynamic knowledge environment consisting of multiple distinct knowledge dimensions. Overall, we find that organizational slack is an important variable in determining the effectiveness of training strategies. Training strategies focused on the most recent skills are found to be the preferred option in most of the considered scenarios. Interestingly, increased efficiencies in training can actually create preference conflict between employees and the firm. Our findings indicate that firms facing longer knowledge life cycles, higher slack in workforce capacity, and better training efficiencies actually face more difficult challenges in knowledge management.     

Global Software Development: Commitment,Trust and Cultural Sensitivity in Strategic Partnerships

Much research has studied off-shore outsourcing from a Western client perspective. This article tries to shed light on what an Indian vendor perceives as important to manage large and complex strategic partnerships in IT outsourcing, and in particular how mutually profitable, long-term relationships with European clients are created and maintained, both at company and project levels. We investigate this issue through qualitative interviews with various vendor representatives in offshore and on-site teams in a top tier multinational company of Indian origin.In the analysis of interview accounts of close collaboration processes in two large and complex projects, where off-shoring of software development is moved to a strategic level, we found that the vendor was able to establish a strategic partnership through long-term engagement with the field of banking and insurance as well as through conscious relationship management with the clients. Three major themes describe important aspects of the strategic partnerships: 1) senior management commitment and employee identification with the projects, 2) mutual trust and transparency, and 3) cross-cultural understanding and sensitivity. The article draws attention to the important collaborative work done by people who are able to span boundaries in the complex organizational set-up of global IT development projects.     

Prices,Markups, and Trade Reform

This paper examines how prices, markups, and marginal costs respond to trade liberalization. We develop a framework to estimate markups from production data with multi‐product firms. This approach does not require assumptions on the market structure or demand curves faced by firms, nor assumptions on how firms allocate their inputs across products. We exploit quantity and price information to disentangle markups from quantity‐based productivity, and then compute marginal costs by dividing observed prices by the estimated markups. We use India's trade liberalization episode to examine how firms adjust these performance measures. Not surprisingly, we find that trade liberalization lowers factory‐gate prices and that output tariff declines have the expected pro‐competitive effects. However, the price declines are small relative to the declines in marginal costs, which fall predominantly because of the input tariff liberalization. The reason for this incomplete cost pass‐through to prices is that firms offset their reductions in marginal costs by raising markups. Our results demonstrate substantial heterogeneity and variability in markups across firms and time and suggest that producers benefited relative to consumers, at least immediately after the reforms.     

Market Orientation,Ownership Type,and E‐Business Assimilation: Evidence from Chinese Firms

While more and more firms have implemented e‐business in business operations, a better understanding of the factors that successfully drive the assimilation of e‐business will provide insights for firm executives and practitioners to develop effective strategies for e‐business. Different from previous studies that focus on individual‐level factors related to business executives and top management teams, this study examines how firm‐level strategic and cultural factors shape e‐business assimilation. Based on the strategy and marketing literature on market orientation and firm ownership, we developed a research model to describe how a firm's market orientation impacts e‐business assimilation. The model also describes the moderating effect of firm ownership type on the relationship between market orientation and e‐business assimilation. Based on data from 301 Chinese international trade firms, we found that two dimensions of market orientation (i.e., customer orientation, competitor orientation) had significant effects on e‐business assimilation. However, the third dimension, interfunctional coordination, was only partially significant. In addition, ownership type was a significant moderator of the effects of customer orientation and competitor orientation on e‐business assimilation, although ownership type was not a moderator of interfunctional coordination. Being one of the first studies of the impact of market orientation and firm ownership type on e‐business assimilation, we conclude with a discussion of the implications for future research and practice.     

Environmental Factors,Managerial Processes,and Information Technology Investment Strategies

Although significant research attention has been directed at understanding the value of information technology (IT) investments for firms, very little attention has been paid to understand the IT investment behavior of firms. This article seeks to fill this void. We introduce the concept of IT investment strategy, defined by dimensions of intensity and proactiveness, to characterize the IT investment behavior of firms. Synthesizing the environmental deterministic and strategic choice perspectives of a firm's strategic decision making, we examine the effects of environmental factors, managerial processes, and the interplay between them on IT investment strategy. Specifically, we examine the impact of environmental factors such as industry clockspeed and information intensity on IT investment strategy. We also incorporate the strategic choice perspective to argue that managerial processes such as frequent chief executive officer—chief information officer communications and collective information systems planning play a critical role in shaping the firm's IT investment strategy. The empirical results show that the environmental variables are related to IT investment strategy. Besides, managerial processes serve as a means to understand the environment and thus moderate the relationships between the environmental variables and the various facets of IT investment strategy. The conceptualization of IT investment strategy and the focus on both environmental determinism and strategic choice should enrich our understanding of firms’ IT investing behavior.     

Multilevel Social Dynamics Considerations for Project Management Decision Makers: Antecedents and Implications of Group Member Tie Development

Successful projects represent the effective culmination of management skills, planning, and individual project member strengths. In operations management, such strengths are often viewed predominantly from the perspective of skill base. However, it has become increasingly evident that behavioral traits associated with individuals play a very significant, if not ultimately dominating, role in the effectiveness of certain group projects. Our aim in this study is to look into how certain individual attributes viewed as relevant to these project contexts may lead to social networking decisions that have impacts spanning multiple levels of analysis. Such insights are likely to prove valuable to decision makers managing project teams as well. We employ a controlled 4‐month investigation of multiple projects, for which we are able to consider both objective, and subjective pre‐, in situ, and postproject data. Our results demonstrate that the issues of perceived control, confidence, and conscientiousness are relevant not only in driving individual perceptions of the value of within‐group interactions, and hence the development of associated ties, but are also ultimately relevant in helping to drive higher levels of group performance.     

A process-oriented perspective of IS success: Examining the impact of IS on operational cost

Effective measurement of information system (IS) success continues to be a top concern for both practitioners and researchers. Labeled the “productivity paradox”, previous attempts to quantify the benefits of IS have often resulted in inconclusive or inconsistent results. The present study contributes to IS success research through the development and empirical testing of a process-oriented model of IS success. Using an operational perspective and combining primary and secondary measures, this study examines the influence of lower-level intangible IS and information technology (IT) benefits on higher-level financial measures. Additionally, we introduce IS plan quality as an antecedent to the model's input variables. Primary survey data from CIOs of primarily Fortune 2000 size firms are combined with secondary data, total operational cost, from Compustat to facilitate the examination of the IS benefits. This study also addresses shortcomings cited in other studies that might have contributed to the productivity paradox by including control variables in the model, defining a research perspective—the operational success perspective—and clearly articulating the level of analysis as the organizational level. The results supported a process-oriented view of the benefits from IS and showed how the effects of IS along a path can lead to better organizational performance, in this case, lower overall costs. These results are discussed and future research implications are presented.     

The Role of Interorganizational and Organizational Factors on the Decision Mode for Adoption of Interorganizational Systems*

The dramatic growth of interorganizational systems (IOS) has changed the way organizations conduct their business, and has resulted in significant tangible and intangible benefits being realized by participating firms. However, the implementation of these IOS requires the cooperation and commitment of all the participating members. These members may have complex economic and business relationships among themselves that can result in a number of social, political, and economic factors influencing the adoption and implementation of IOS. This study examines the role of interorganizational and organizational factors on the decision mode for adoption of IOS, in the specific context of electronic data interchange (EDI). Four interorganizational factors, based on the socio-political framework derived from research in marketing, and five organizational factors based on research in IS were used in the study. The data for the study were collected through a large scale field survey. Two respondents, the sales/purchase manager and the IS manager, from 201 firms responded to the survey. The results of discriminant analysis of the data reveal that two interorganizational variables, competitive pressure and exercised power, and two organizational variables, internal need and top management support, are important variables to differentiate firms with proactive decision mode from firms with reactive decision mode. The study also evaluates the differences between proactive and reactive firms on three implementation outcomes. Proactive firms are found to have greater extent of adaptation, more external connectivity with trading partners, and better integration of EDI information in their internal IS applications.     

Toward a Theory of Whistleblowing Intentions: A Benefit‐to‐Cost Differential Perspective*

In order to rescue information technology (IT) projects when they go awry, it is critical to understand the factors that affect bad news reporting. Whistleblowing theory holds promise in this regard and a number of salient factors that may influence whistleblowing intentions have been identified. However, an integrative theory that explains how they influence whistleblowing intentions has been conspicuously absent. In this research, we introduce and test a middle‐range theory of whistleblowing that can explain how and why a variety of factors may influence an individual's whistleblowing intentions. Drawing on the social information processing perspective, we propose that individuals holistically weigh the perceived “benefit‐to‐cost differential” and that this mediates the relationship between whistleblowing factors and whistleblowing intentions. Tests using data collected from 159 experienced IT project managers largely support our theoretical perspective, in which the central explanatory variable (benefit‐to‐cost differential) significantly mediates a majority of the proposed relationships. Implications of these findings for research and practice are discussed.     

A Decisional Framework of Offshoring: Integrating Insights from 25 Years of Research to Provide Direction for Future*

Mirroring the growing trend for firms to support their operations by locating activities abroad, research on the practice of offshoring has increased considerably in recent years. However, despite the mounting research, understanding of the key factors influencing decision‐making for offshoring remains surprisingly limited due to fragmentation. In this study, we synthesize and integrate insights from different research domains in order to develop a comprehensive decisional framework for key offshoring decisions. The integrative decisional framework is based on a systematic review of offshoring research published in the most influential management and business journals in the past 25 years. In addition to providing a snapshot of the state of research on decision‐making for offshoring, this study aims to stimulate future research by identifying promising research opportunities. In particular, we propose that future research should use alternative theories to incorporate overlooked aspects of decision‐making, integrate different theories to account for the interdependencies between decisions, and adopt a portfolio perspective that considers each decision as part of an overall offshoring strategy.     

Managing Multiple Facets of Risk in New Product Alliances*

The trend of forming alliances to develop new products continues; however, many of these new product alliances fail. As such we explore how key risk types intrinsic in new product alliances, performance, relational, and knowledge appropriation risks, influence alliance success. Further, we theorize that different alliance governance mechanisms can reduce the negative impact of risks on alliance success. To disentangle possible heterogeneous factors across firms that may affect the interplay of risk assessments and the use of governance mechanisms, we employ latent class regression analysis on survey data collected from 128 new product alliance firms and find support for a two‐regime solution. Longer alliance relationships and lower technological turbulence are factors for some firms (regime one), while the opposite are factors for other firms (regime two). These two regimes show different patterns in the interplay of risk assessments and governance for alliance success. Our theory and results support viewing risk as a multiple‐factor concept and by understanding the different impacts of the risk types in new product alliances and how governance mechanisms mitigate such effects, we aid managers' decision making regarding the balance of contractual versus normative governance in new product alliances. Understanding the heterogeneous factors inherent in these complex relationships enables managers to understand the conditions in which various governance mechanisms promote new product alliance success.     

Effect of Quality Management Systems and Total Quality Management on Productivity Before and After: Empirical Evidence from the Indian Auto Component Industry

We study the linkages between firm‐level quality initiatives such as quality management systems (QMS) and total quality management (TQM) and output productivity in the Indian auto component industry. We use externally validated quality certification and quality awards as proxies for QMS and TQM, respectively, as it is difficult to directly measure the QMS and TQM efforts of firms. We use an unbalanced panel of 220 firms and a balanced panel of 73 firms from the Indian auto component industry over the period 1993–2006 to study these links. Both parametric as well as non‐parametric approaches are used, as appropriate, to measure the rate of change in productivity and the impact of quality initiatives on productivity change during this period. We determine the proportion of productivity resulting from technical change and relative efficiency change, thus providing insights into the structure of productivity improvements. We find that TQM efforts resulted in a high rate of productivity change (11%) in the award‐winning firms after the award. On the other hand, pre‐certification productivity change due to QMS was 5% and post‐certification change was 3.6%. In the periods prior to certification, productivity change was driven mainly by technical change; whereas the source of productivity change after certification is mixed. However, prior to awards, productivity change was driven mainly by relative efficiency change, whereas post‐award productivity change was due to technical change. The results suggest that management focus on attaining certification did generate conceptual learning (linked to technical change) during the period leading to certification, but these effects were not significant after certification. The results also suggest that the TQM programs generated significant productivity gains in the long run, although setting the associated systems in place did not result in significant productivity change prior to winning awards. Thus, the study provides direct but nuanced evidence linking quality certification as well as the adoption of TQM programs to the associated conceptual and operational learning processes and their impact on the change in productivity.