Uncovering the Hidden Costs of Offshoring: The Interplay of Complexity, Organizational Design, and Experience

    Research output: Contribution to journalJournal articleResearchpeer-review

    Abstract

    This study investigates estimation errors due to hidden costs—the costs of implementation that are neglected in strategic decision-making processes—in the context of services offshoring. Based on data from the Offshoring Research Network, we find that decision makers are more likely to make cost-estimation errors given increasing configuration and task complexity in captive offshoring and offshore outsourcing, respectively. Moreover, we show that experience
    and a strong orientation toward organizational design in the offshoring strategy reduce the cost-estimation errors that follow from complexity. Our findings contribute to research on the effectiveness of sourcing and global strategies by stressing the importance of organizational design and experience in dealing with increasing complexity.
    This study investigates estimation errors due to hidden costs—the costs of implementation that are neglected in strategic decision-making processes—in the context of services offshoring. Based on data from the Offshoring Research Network, we find that decision makers are more likely to make cost-estimation errors given increasing configuration and task complexity in captive offshoring and offshore outsourcing, respectively. Moreover, we show that experience
    and a strong orientation toward organizational design in the offshoring strategy reduce the cost-estimation errors that follow from complexity. Our findings contribute to research on the effectiveness of sourcing and global strategies by stressing the importance of organizational design and experience in dealing with increasing complexity.
    LanguageEnglish
    JournalStrategic Management Journal
    Volume34
    Issue number5
    Pages533-552
    Number of pages20
    ISSN0143-2095
    DOIs
    StatePublished - 2013

    Keywords

      Cite this

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      title = "Uncovering the Hidden Costs of Offshoring: The Interplay of Complexity, Organizational Design, and Experience",
      abstract = "This study investigates estimation errors due to hidden costs—the costs of implementation that are neglected in strategic decision-making processes—in the context of services offshoring. Based on data from the Offshoring Research Network, we find that decision makers are more likely to make cost-estimation errors given increasing configuration and task complexity in captive offshoring and offshore outsourcing, respectively. Moreover, we show that experienceand a strong orientation toward organizational design in the offshoring strategy reduce the cost-estimation errors that follow from complexity. Our findings contribute to research on the effectiveness of sourcing and global strategies by stressing the importance of organizational design and experience in dealing with increasing complexity.",
      keywords = "Hidden costs, Offshoring, Complexity, Estimation errors, Organizational design",
      author = "Larsen, {Marcus M.} and Stephan Manning and Torben Pedersen",
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      Uncovering the Hidden Costs of Offshoring : The Interplay of Complexity, Organizational Design, and Experience. / Larsen, Marcus M.; Manning, Stephan; Pedersen, Torben.

      In: Strategic Management Journal, Vol. 34, No. 5, 2013, p. 533-552.

      Research output: Contribution to journalJournal articleResearchpeer-review

      TY - JOUR

      T1 - Uncovering the Hidden Costs of Offshoring

      T2 - Strategic Management Journal

      AU - Larsen,Marcus M.

      AU - Manning,Stephan

      AU - Pedersen,Torben

      PY - 2013

      Y1 - 2013

      N2 - This study investigates estimation errors due to hidden costs—the costs of implementation that are neglected in strategic decision-making processes—in the context of services offshoring. Based on data from the Offshoring Research Network, we find that decision makers are more likely to make cost-estimation errors given increasing configuration and task complexity in captive offshoring and offshore outsourcing, respectively. Moreover, we show that experienceand a strong orientation toward organizational design in the offshoring strategy reduce the cost-estimation errors that follow from complexity. Our findings contribute to research on the effectiveness of sourcing and global strategies by stressing the importance of organizational design and experience in dealing with increasing complexity.

      AB - This study investigates estimation errors due to hidden costs—the costs of implementation that are neglected in strategic decision-making processes—in the context of services offshoring. Based on data from the Offshoring Research Network, we find that decision makers are more likely to make cost-estimation errors given increasing configuration and task complexity in captive offshoring and offshore outsourcing, respectively. Moreover, we show that experienceand a strong orientation toward organizational design in the offshoring strategy reduce the cost-estimation errors that follow from complexity. Our findings contribute to research on the effectiveness of sourcing and global strategies by stressing the importance of organizational design and experience in dealing with increasing complexity.

      KW - Hidden costs

      KW - Offshoring

      KW - Complexity

      KW - Estimation errors

      KW - Organizational design

      U2 - 10.1002/smj.2023

      DO - 10.1002/smj.2023

      M3 - Journal article

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      EP - 552

      JO - Strategic Management Journal

      JF - Strategic Management Journal

      SN - 0143-2095

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      ER -