The effects of internal resources and partnership quality on firm performance: An examination of Indian BPO providers

Firms from developed nations are increasingly resorting to business process outsourcing (BPO) as part of their global sourcing strategy. Although BPO is a growing practice, there has been limited empirical attention in understanding the phenomenon, particularly from the perspective of provider firms that execute important business processes for their overseas clients. In this paper we focus on the resources and capabilities that are utilized by the providers in fulfilling their clients' sourcing needs. Using resource-based view and social exchange as theoretical foundations, we argue that providers' human capital, organizational capital, management capability, and partnership quality are crucial assets that are deemed valuable by the clients and are utilized by the providers in attaining higher performance. Using a sample of Indian BPO providers, we empirically test three models (direct, mediating and moderating) to understand how these assets impact firm-level performance. Results show that resources and capabilities relate to performance in varying measures and partnership quality has partial-mediating and moderating effects on these relationships. We conclude by discussing the theoretical and practical implications of the study and highlighting avenues of future inquiry.     

Determinants of Interoutsourcing: An Analytical Approach

Interoutsourcing is a round‐way process in which the vendor is its customer's customer and the customer is its vendor's vendor. While interoutsourcing is emerging as a prominent outsourcing strategy in many industries, there are no rigorous analytical studies focusing on this mechanism. In this article, we analytically demonstrate the efficacy of interoutsourcing by comparing it with normal outsourcing. Our results show that, compared with normal outsourcing, interoutsourcing acts as a self‐enforcer of vendor firms' behaviors toward increasing outsourcing service value. However, in situations where there is a mismatch of outsourcing activities, a high degree of incentive that is based on outsourcing service value, and a high cost of capital, interoutsourcing is not preferred to normal outsourcing. We discuss these results in detail and provide managerial implications for firms involved in interoutsourcing decisions.     

Performance Impacts of Strategy,Information Technology Applications,and Business Process Outsourcing in U.S. Manufacturing Plants

This paper develops a conceptual model to study the role of outsourcing strategies and plant‐level information technology (IT) application infrastructure in the outsourcing of production and support business processes, as well as their subsequent impact on overall plant performance. We validate this model empirically using cross‐sectional survey data from U.S. manufacturing plants. We find that some IT applications are more effective at enabling the outsourcing of business processes than others. For example, the implementation of enterprise management systems is associated with the outsourcing of both production and support processes, whereas operations management systems are not associated with the outsourcing of plant processes. Plants with a low‐cost outsourcing strategy are more likely to outsource support processes than plants with a competency‐focused outsourcing strategy. However, both cost‐ and competency‐based strategies have a positive and similar impact on the outsourcing of production processes. In terms of implications for plant performance, our findings indicate that the outsourcing of production and support processes is associated with higher gross margins. Although plant IT infrastructure is positively associated with favorable on‐time delivery rates, there is no positive association between the incidence of plant outsourcing and on‐time delivery rates. These results have implications for crafting plant‐level outsourcing strategies and for investments in IT systems to facilitate the outsourcing of business processes for enhanced plant performance.     

The impact of venture capital on investee companies: evidence from Spain

This paper examines the impact of venture capital investors on the financial structure of investee companies and the factors relevant to their capital structure, differentiated according to the investor’s public or private nature. This paper contributes to our understanding of the beneficial effects of such investors in response to the funding needs of SMEs and the decisions taken in this respect. The empirical analysis shows that, on average, these investee companies have a lower level of short-term debt than the average Spanish company. It is suggested that the debt structure is related to the growth opportunities presented, the business sector, the geographic location and the duration of the venture capital participation. These results, which are more significant in the case of companies receiving funds from public investors, highlight the effectiveness of the economic function of venture capital.     

Internationalization, innovation and entrepreneurship: business models for new technology-based firms

New technology-based firms, particularly those that develop their business around a new technological platform, are likely to be impacted by globalization, in terms of both pace of innovation and pressure of competition. For these firms, strategic decisions and growth processes are characterized by a deep inter-relationship amongst the processes of internationalization, innovation and entrepreneurship; processes which have tended to be examined independently in distinct bodies of literature. In practice strategic decisions concern each of these processes and address issues such as organizational boundaries, location of the operational activities, what activities to focus on and selection of value partners. The business model by which firms operate needs also to accommodate the spatial dimensions indicated by globalization; and the emergence of global technology markets. Little is known to date about the extent to which business models accommodate or are adapted to internationalization, innovation and entrepreneurship. This paper presents a review of the business model literature from which a generic business model framework is derived, identifying and introducing the main elements of these processes as the firms?? focus, modus and locus. This contribution makes a clear distinction between the business model and the strategy concepts and highlights the relevance of location decisions??not considered by extant business model literature to date. While our discussion draws on the high technology new venture as our primary example, we believe our business model conceptualization has general applicability.     

How Governance Misalignment and Outsourcing Capability Impact Performance

Notwithstanding the popularity of outsourcing as a business strategy, the performance benefits realized through outsourcing efforts are observed to be mixed in practice. This leads to important unresolved questions regarding why some firms are able to derive substantial value from their outsourcing initiatives while other firms are left disappointed. This study joins an emerging literature integrating transaction cost economics and capabilities‐based perspectives to develop a deeper understanding of the drivers of outsourcing performance. I develop a theoretical model that examines the independent and joint influence of governance misalignment (i.e., deviation from transaction cost's predicted mode of governance) and a firm's outsourcing capability on the performance of outsourced processes. I test the theoretical model using a dataset of 172 outsourced and 156 in‐house processes. The finding that governance misalignment corresponds to inferior process performance supports transaction cost's discriminating alignment hypothesis. Interestingly, I also find that a retained technical expertise (TE) and outsourcing knowledge management routines (OKMR; both contributors to a firm's outsourcing capability) positively influence outsourcing performance both directly and via their relationship with governance misalignment. While a retained technical expertise and outsourcing knowledge management routines each positively influence outsourcing performance, they do so in distinctive ways. These findings have important managerial implications and make a significant theoretical contribution. Specifically, this study demonstrates that the notion of a governance misalignment is firm‐specific, conditional on the governance capabilities of the organization. This insight underscores the value of integrating transaction cost logic with capabilities‐based perspectives.     

Zur Rolle versunkener Kosten in aufeinander folgenden IT-Outsourcing-Entscheidungen

Despite the ongoing theoretical and practical investigations of IT outsourcing, there are still a large number of projects that are unsuccessful or even fail all along the line. Studies in the decision-making literature indicate that psychological effects in the evaluation of decision-relevant facts may be one relevant reason for unsuccessful decisions. By conducting a quantitative empirical study with German IT decision makers, we investigate the influence of non-rational factors within consecutive IT outsourcing decisions. We show that beside the rational economic factors (transaction, production and the rational part of switching costs) also non-rational switching costs in terms of sunk cost do significantly contribute to the explanation of consecutive IT outsourcing decisions. Furthermore, we examine moderating effects that affect the non-rational behavior of IT decision makers. Besides the theoretical contribution to analyze the effects of sunk cost on both an individual and organizational level, we also derive practical implications. In consecutive IT outsourcing decisions, the non-rational behavior triggered by sunk cost can for example be reduced by replacing the decision maker or consult a decision team when sunk cost play a considerable role.     

The Roles of Worker Expertise,Information Sharing Quality,and Psychological Safety in Manufacturing Process Innovation: An Intellectual Capital Perspective

This paper examines the roles of three elements of intellectual capital in implementing process innovations. Building upon prior literature, we develop a model describing how worker expertise, information sharing quality, and psychological safety work together as elements of the human, structural, and social dimensions of intellectual capital to influence the technical success of manufacturing process innovation (MPI) projects. Results of an analysis of data describing 179 MPI projects in US firms strongly support a multidimensional, process‐oriented view of intellectual capital's effects on MPI project technical performance. We also find that the incrementalness of an MPI project plays a moderating role over the relationship between worker expertise and MPI performance. Our study provides insights on how intellectual capital can be more effectively accumulated in a project environment.     

Entrepreneurial orientation and social ties in transitional economies

Recent research suggests that entrepreneurial orientation (EO) has a more complex effect on performance (i.e. non-linear instead of linear) than previously considered. We extend this view by examining the non-linear effect of each individual dimension of EO (i.e. innovativeness, proactiveness, and risk-taking) on firm performance in the context of a transitional, collectivist economy. Drawing upon social capital theory, we also examine under which social capital conditions (i.e., business and political ties) each dimension of EO is most effective. Using survey data from 137 firms in Vietnam Top 500 Companies, this study shows that innovativeness and proactiveness have inverted U-shaped relationships with firm performance, while the effect of risk-taking on firm performance is also non-linear but in the form of increasing returns. Findings also show that social capital from business ties differentially moderates the effects of EO dimensions on performance. Similarly, social capital from political ties has different moderating effects on the innovativeness-performance and proactiveness-performance linkages. The findings urge managers of firms operating in transitional economies to take the levels of social capital from business ties and political ties into consideration when making their decision on which entrepreneurial strategy to pursue.     

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.     

The Influence of Cost and Quality Priorities on the Propensity to Outsource Production*

Outsourcing of production has escalated over the past decade due to unprecedented competition and worldwide access to low‐cost labor markets. This article examines how cost and quality priorities—two key attributes of manufacturing strategy—influence a manufacturer's propensity to outsource. By doing so, we bridge the existing gap between research on manufacturing strategy and firm boundaries. We develop a theory‐based model that links a manufacturer's cost and quality priorities to its plans to outsource production. Our empirical analyses, based on survey data obtained from 867 manufacturing business units, control for firm‐specific factors previously shown to impact outsourcing, including asset specificity, uncertainty, and current capabilities in cost and quality. We found that the competitive priority placed on cost played an integral role in sourcing decisions, while, surprisingly, conformance quality priorities did not. The cost result is consistent with our expectations and observations in practice. The significant effect of cost priority on outsourcing shows that any theory of firm boundaries that fails to consider competitive priorities is incomplete. The finding regarding quality, which was counter to our expectations, may partially explain why there is an emergence of so many nonconforming products associated with outsourcing. Taken together, our results provide theoretical insights for future research into how manufacturing managers can improve their decision making on outsourcing production.     

International outsourcing of services: A partnership model

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, Philippines etc. This happens as more and more firms engage in international outsourcing of services (IOS) to survive in today's highly competitive business environment. Despite increase in IOS, the nature of partnerships involved between clients and their overseas providers have not received adequate attention in the scholarly literature. In this paper, we develop a conceptual model that explains three possible types of IOS partnership. We discuss how these partnerships vary in the way they are conceived and implemented. Propositions are offered after elaborating on each type of partnership. We conclude by discussing the academic and practical implications of our model.     

Managing Interdependence: The Effects of Outsourcing Structure on the Performance of Complex Projects*

The outsourcing of complex activities has become a common organizational practice. Yet very little research has focused on the implications of how these activities are divided up among outsourcing partners. Drawing on structural contingency theory, we argue that: (1) because activities within stages of complex projects are highly interdependent, outsourcing structures where owner firms do not maintain high levels of dominance over the activities that are performed will pose control and coordination challenges, leading to poor project performance; (2) the adverse effects of poorly structured outsourcing arrangements will spill over to subsequent project stages when activities are interdependent across project stages; and (3) dividing activities among large numbers of contractors or distributing work evenly among contractors exacerbates coordination and control problems further contributing to poor project performance. Our empirical analysis of 323 capital facility construction projects supports our predictions. Overall, these results provide strong evidence that some outsourcing structures are more costly than others and that because of the nature of complex projects the detrimental effects of poorly structured outsourcing are often not completely observable at the time activities are completed. We discuss the implications of our findings for capital construction and for outsourcing more generally.     

Do service-oriented IT architectures facilitate business process outsourcing?

How does a firm’s IT architecture affect its potential to outsource business processes? As Information Technology (IT) has become many firms’ essential operational infrastructure or “backbone”, we are interested in scrutinizing to what extent the kind of IT architecture affects a firm’s boundaries or the plasticity of its boundaries. Focusing on the particular concept of service-oriented architectures (SOA), we concretely ask: How does SOA affect business process outsourcing potentials? Since SOA is widely expected to modularize the IT implementation of business processes, it should increase business process outsourcing (BPO) in terms of buying in the provision of single business functionalities. We develop and empirically evaluate a theoretical model that conceptualizes the relationship between SOA and BPO. Questionnaire data from 115 firms give first evidence that SOA facilitates BPO. By increasing IT modularity, SOA supports BPO by increasing sourcing flexibility and, in particular, operational benefits, while at the same time lowering financial risks and strategic risks, such as lock-in. Overall, however, firms see SOA-based BPO mainly in an operational context with low hidden costs and little strategic benefits.     

When outsourcing is not an option: International relocation of investment bank research — Or isn't it?

Outsourcing is high on the agenda of firms seeking to cut costs. Based on an enhanced value-chain concept we develop a model that determines the conditions under which outsourcing and offshoring are not expedient. The model allows for an integrated analysis of horizontal and vertical links to actors within and outside the firm. Equity and country research in investment banks and their outsourcing potential are used as case studies. We draw mainly on qualitative evidence from interviews with investment bank analysts, as well as data on locations of research units of foreign investment banks in India. 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 firm. Our analysis shows that there is little, if any, scope for outsourcing but some potential for low-level research activities to be offshored to low-cost regions.     

Sustaining the Buyout Governance Model: Inside Secondary Management Buyout Boards

This paper examines the impact of private equity (PE) directors and their human capital on operating performance in a unique hand‐collected sample of 200 secondary management buyouts (SMBOs) during 2000–2015. It shows that PE directors’ human capital tends to play a statistically and economically important role in performance. Financial (rather than operational) experience of PE directors in acquiring PE firms tends to have a substantial impact on post‐SMBO profitability, while high‐level business education is especially important in post‐SMBO growth performance enhancement. Complementary expertise, provided by directors in buying and selling PE firms, plays an important role only in post‐SMBO growth improvements. Overall, the paper's results provide evidence that governance benefits of the buyout model tend not to be exhausted in the primary buyout stage, but the effects in the secondary buyout phase depend on the nature of PE directors’ human capital resource, notably in respect of the balance between board monitoring and advisory roles. This study therefore adds to growing evidence on how the ownership and life‐cycle nature of firms affect sustainability of boards fulfilling their roles. The results are robust to sample selection bias, different types of PE firms and different measures of human capital.     

Why Do Women's Wages Increase So Slowly Throughout Their Career? A Dynamic Model of Statistical Discrimination

Abstract. The aim of this paper is to explain the growing wage differentials between men and women during their working careers. We provide a dynamic model of statistical discrimination, which integrates specific human capital decisions: on‐the‐job training investment and wages are endogenously determined. We reveal a small wage differential at the beginning of women's career, but women's wages increase more slowly; this is partly due to a lower level of human capital investment by women and partly because firms smooth training costs between different periods.     

Globalization and its impact on global managers' decision processes

Globalization of business can have a profound impact on the decision-making processes of managers responsible for making these complex interrelated decisions. This paper explores the global decision-making processes of global managers. The first element examined is the multiple intelligences that global managers need to be able to address the issues associated with global decisions. These eight IQs are considered critical elements in the decision-making capabilities of global managers. Following this discussion, the composition of global groups and their impact on the decision-making process is explored to determine how the composition of the group inhibits/supports the global manager. The next step in the decision-making process discussed in the paper is that of the nature of the task(s). The type of task can have a direct impact on the effectiveness as well as the efficiency of global manager's decision-making. The crux of the issue is that a global orientation to decision-making is poised as being significantly different from decision processes use by managers in a multinational context.