The Hidden Costs of Offshoring: The Impact of Complexity, Design Orientation and Experience

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    Abstract

    This study seeks to explain hidden costs of offshoring, i.e. unexpected costs resulting from the relocation of business tasks and activities outside the home country. We develop a model that highlights the role of complexity, design orientation and experience in explaining hidden costs of offshoring. Specifically, we propose that hidden costs can be explained by the combination of increasing structural, operational and social complexity of offshoring activities. In addition, we suggest that firm orientation towards organizational design as part of an offshoring strategy and offshoring experience moderate the relationship between complexity and hidden costs negatively i.e. reduces the cost generating impact of complexity. We develop three hypotheses
    and test them on comprehensive data from the Offshoring Research Network (ORN). In general, we find support for our hypotheses. A key result of our study is to suggest how hidden costs of offshoring can be mitigated through an explicit orientation towards improving organizational processes and structures as well as experience with offshoring.
    Original languageEnglish
    Title of host publicationProceedings of the 53rd Annual Meeting of the Academy of International Business
    EditorsShige Makingo , Tunga Kiyak
    Place of PublicationEast Lansing, MI
    PublisherAcademy of International Business
    Publication date2011
    Pages155-156
    Publication statusPublished - 2011
    EventAIB 2011 Annual Meeting: International Business for Sustainable World Development - Nagoya, Japan
    Duration: 24 Jun 201128 Jun 2011
    Conference number: 53
    http://aib.msu.edu/events/2011/

    Conference

    ConferenceAIB 2011 Annual Meeting
    Number53
    CountryJapan
    CityNagoya
    Period24/06/201128/06/2011
    Internet address
    SeriesAcademy of International Business. Annual Meeting. Proceedings
    Volume53
    ISSN2078-4430

    Cite this

    Møller Larsen, M., Manning, S., & Pedersen, T. (2011). The Hidden Costs of Offshoring: The Impact of Complexity, Design Orientation and Experience. In S. Makingo , & T. Kiyak (Eds.), Proceedings of the 53rd Annual Meeting of the Academy of International Business (pp. 155-156). Academy of International Business. Academy of International Business. Annual Meeting. Proceedings, Vol.. 53 http://aib.msu.edu/events/2011/AIB2011_ConferenceProceedings.pdf