Global Sourcing of Advanced Services: A Strategic Management Analysis on Activity Level

In this exploratory study we take a strategic management approach to global sourcing of advanced services. We discuss in which ways conventional sourcing differs from strategic sourcing and what impels firms to aim for the latter (or, prevent them from doing so). Potentially, strategic global sourcing of services has high returns, but is also associated with high risks and needs for organizational changes. Strategic global sourcing may therefore be outside firms’ “comfort zone” – a composite of organizational knowledge transferability, structural inertia, managers’ risk preferences, and – most interesting in a strategic management perspective ‐ their ability to mitigate risks of strategic global sourcing. One important risk reducing measure is internalization of (out)sourced service activities. Many firms instigate global sourcing via conventional offshore outsourcing. However, as the human asset specificity of the outsourcing operation increases, firms are pulled out of their comfort zones and a desire for internalization arises. An illustrative company case gives suggestions as to how, in practice, internalization may be accomplished without losing valuable human assets held by the local service providers.