Failing to Estimate the Costs of Offshoring: A Study on Process Performance

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    Abstract

    This article investigates cost estimation errors in the context of offshoring. It is argued that an imprecise estimation of the costs related to implementing a firm activity in a foreign location has a negative impact on the process performance of that activity. Performance is deterred as operations are likely to be disrupted by managerial distraction and resource misallocation. It is also argued that this relationship is mitigated by the extent to which firms use modularity to coordinate the activity but worsened by the extent to which ongoing communication is used. The results, based on a hierarchical regression analysis of a unique survey on Danish and Swedish firms, support these arguments.
    Original languageEnglish
    JournalInternational Business Review
    Volume25
    Issue number1
    Pages (from-to)307-318
    Number of pages12
    ISSN0969-5931
    DOIs
    Publication statusPublished - 2016

    Keywords

    • Cost estimation errors
    • Offshoring
    • Modularity
    • Ongoing communication
    • Process performance

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