Fine Slicing of the Value Chain and Offshoring of Essential Activities: Empirical Evidence from European Multinationals

Esmeralda Linares-Navarro, Torben Pedersen, José Pla-Barber

    Research output: Contribution to journalJournal articleResearchpeer-review

    Abstract

    The offshoring of more advanced activities is increasing and a debate about the limits of offshoring has emerged. Companies are fine-slicing their value chains, and moving beyond the offshoring of peripheral and non-core activities to the offshoring of advanced and essential activities that are closer to their core (e.g. research, design and product development). The challenge is to understand the limits of offshoring and the most appropriate modes of offshoring. The purpose of this paper is to analyze what activities are offshorable and how best to govern offshored activities. We argue that companies are redefining their core activities and in this process, some essential activities previously viewed as core activities are being detached from the core, and they become more offshorable.
    The study uses a sample of 565 offshoring operations conducted by 263 multinational companies from 15 European countries. A logistic regression was used to analyze the relationship between the activities offshored (non-core versus essential activities) and the offshoring mode implemented (captive offshoring versus offshore outsourcing). We find that essential activities are typically offshored using the captive mode, while offshore outsourcing is commonly used to offshore non-core activities; and this trend is even more pronounced in knowledge-intensive companies where interfaces between the various activities are less standardized.
    This paper offers managers and CEOs an integrative tool that can make easier decisions regarding offshoring modes (captive versus offshore outsourcing) and serves as a reference point for further analyses of the implementation of offshoring strategies in multinational enterprises.
    Original languageEnglish
    JournalJournal of Business Economics and Management
    Volume15
    Issue number1
    Pages (from-to)111-134
    Number of pages24
    ISSN1611-1699
    DOIs
    Publication statusPublished - 2014

    Keywords

    • Global sourcing
    • Offshoring
    • Outsourcing
    • Value chain
    • Core activities
    • Multinational firms
    • International strategies

    Cite this

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    title = "Fine Slicing of the Value Chain and Offshoring of Essential Activities: Empirical Evidence from European Multinationals",
    abstract = "The offshoring of more advanced activities is increasing and a debate about the limits of offshoring has emerged. Companies are fine-slicing their value chains, and moving beyond the offshoring of peripheral and non-core activities to the offshoring of advanced and essential activities that are closer to their core (e.g. research, design and product development). The challenge is to understand the limits of offshoring and the most appropriate modes of offshoring. The purpose of this paper is to analyze what activities are offshorable and how best to govern offshored activities. We argue that companies are redefining their core activities and in this process, some essential activities previously viewed as core activities are being detached from the core, and they become more offshorable.The study uses a sample of 565 offshoring operations conducted by 263 multinational companies from 15 European countries. A logistic regression was used to analyze the relationship between the activities offshored (non-core versus essential activities) and the offshoring mode implemented (captive offshoring versus offshore outsourcing). We find that essential activities are typically offshored using the captive mode, while offshore outsourcing is commonly used to offshore non-core activities; and this trend is even more pronounced in knowledge-intensive companies where interfaces between the various activities are less standardized.This paper offers managers and CEOs an integrative tool that can make easier decisions regarding offshoring modes (captive versus offshore outsourcing) and serves as a reference point for further analyses of the implementation of offshoring strategies in multinational enterprises.",
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    Fine Slicing of the Value Chain and Offshoring of Essential Activities : Empirical Evidence from European Multinationals. / Linares-Navarro, Esmeralda ; Pedersen, Torben; Pla-Barber, José .

    In: Journal of Business Economics and Management, Vol. 15, No. 1, 2014, p. 111-134.

    Research output: Contribution to journalJournal articleResearchpeer-review

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    T2 - Empirical Evidence from European Multinationals

    AU - Linares-Navarro, Esmeralda

    AU - Pedersen, Torben

    AU - Pla-Barber, José

    PY - 2014

    Y1 - 2014

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    AB - The offshoring of more advanced activities is increasing and a debate about the limits of offshoring has emerged. Companies are fine-slicing their value chains, and moving beyond the offshoring of peripheral and non-core activities to the offshoring of advanced and essential activities that are closer to their core (e.g. research, design and product development). The challenge is to understand the limits of offshoring and the most appropriate modes of offshoring. The purpose of this paper is to analyze what activities are offshorable and how best to govern offshored activities. We argue that companies are redefining their core activities and in this process, some essential activities previously viewed as core activities are being detached from the core, and they become more offshorable.The study uses a sample of 565 offshoring operations conducted by 263 multinational companies from 15 European countries. A logistic regression was used to analyze the relationship between the activities offshored (non-core versus essential activities) and the offshoring mode implemented (captive offshoring versus offshore outsourcing). We find that essential activities are typically offshored using the captive mode, while offshore outsourcing is commonly used to offshore non-core activities; and this trend is even more pronounced in knowledge-intensive companies where interfaces between the various activities are less standardized.This paper offers managers and CEOs an integrative tool that can make easier decisions regarding offshoring modes (captive versus offshore outsourcing) and serves as a reference point for further analyses of the implementation of offshoring strategies in multinational enterprises.

    KW - Department of Management

    KW - University of Valencia

    KW - Faculty of Economics

    KW - Global sourcing

    KW - Offshoring

    KW - Outsourcing

    KW - Value chain

    KW - Core activities

    KW - Multinational firms

    KW - International strategies

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    DO - 10.3846/16111699.2012.745817

    M3 - Journal article

    VL - 15

    SP - 111

    EP - 134

    JO - Journal of Business Economics and Management

    JF - Journal of Business Economics and Management

    SN - 1611-1699

    IS - 1

    ER -