Kotabe, Masaaki, Mol, Michael J. and Ketkar, Sonia. (2008) An evolutionary stage model of outsourcing and competence destruction : a Triad comparison of the consumer electronics industry. MIR: Management International Review, Vol.48 (No.1). pp. 65-94. ISSN 0938-8249

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Abstract

Outsourcing has gained much prominence in managerial practice and academic discussions in the last two decades or so. Yet, we still do not understand the full implications of outsourcing strategy for corporate performance. Traditionally outsourcing across borders is explained as a cost-cutting exercise, but more recently the core competency argument states that outsourcing also leads to an increased focus, thereby improving effectiveness. However, no general explanation has so far been provided for how outsourcing could lead to deterioration in a firm‟s competence base. We longitudinally analyze three cases of major consumer electronics manufacturers, Emerson Radio from the U.S., Japan‟s Sony and Philips from the Netherlands to understand the dynamic process related to their sourcing strategies. We develop an evolutionary stage model that relates outsourcing to competence development inside the firm and shows that a vicious cycle may emerge. Thus it is appropriate to look not only at how outsourcing is influenced by an organization‟s current set of competences, but also how it alters that set over time. The four stages of the model are offshore sourcing, phasing out, increasing dependence on foreign suppliers, and finally industry exit or outsourcing reduction. The evolutionary stage model helps managers understand for which activities and under which conditions outsourcing across borders is not a viable option. Results suggest that each of these firms had faced a loss of manufacturing competitiveness in its home country, to which it responded by offshoring and then outsourcing production. When a loss of competences occurred, some outsourcing decisions were reversed.

Item Type:	Journal Article
Subjects:	H Social Sciences > HD Industries. Land use. Labor
Divisions:	Faculty of Social Sciences > Warwick Business School > Marketing & Strategic Management Faculty of Social Sciences > Warwick Business School
Library of Congress Subject Headings (LCSH):	Offshore outsourcing, Household electronics industry -- Case studies, Emerson Radio and Phonograph Corporation, Sonī Kabushiki Kaisha, Philips Communication Systems (Firm : Hilversum, Netherlands)
Journal or Publication Title:	MIR: Management International Review
Publisher:	Springer
ISSN:	0938-8249
Date:	2008
Volume:	Vol.48
Number:	No.1
Number of Pages:	30
Page Range:	pp. 65-94
Identification Number:	10.1007/s11575-008-0004-1
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Open Access
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URI:	http://wrap.warwick.ac.uk/id/eprint/4409

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