Whether or Not to Prepare for Offshoring: A Simulation Study

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    Abstract

    A consequence of offshoring is increased coordination costs. To counter this, firms can strive to identify a cost reducing organizational configuration either ex ante or ex post to the offshoring implementation. In this paper, we investigate the performance implications of these contrasting strategies through a computational model of offshoring. We find that a proactive approach to offshoring is largely beneficial if the impact of geographic distance and coordination costs relative to production costs is sufficiently high, but that this changes more towards the reactive approach if this diminishes. Thus, we explicate important contingencies in the paradox that firms face when balancing between strategic rationales such as lower production costs in foreign locations and the changing costs of coordination when implementing such strategic rationales.
    Original languageEnglish
    Title of host publicationProceedings of the 54rd Annual Meeting of the Academy of International Business
    EditorsSusan Feinberg, Tunga Kiyak
    Place of PublicationEast Lansing, MI
    PublisherAcademy of International Business
    Publication date2012
    Pages81
    Publication statusPublished - 2012
    EventAIB 2012 Annual Meeting: Rethinking the Roles of Business, Government and NGOs in the Global Economy - George Washington University and University of Maryland, Washington, United States
    Duration: 30 Jun 20123 Jul 2012
    Conference number: 54
    http://aib.msu.edu/events/2012/

    Conference

    ConferenceAIB 2012 Annual Meeting
    Number54
    LocationGeorge Washington University and University of Maryland
    CountryUnited States
    CityWashington
    Period30/06/201203/07/2012
    Internet address
    SeriesAcademy of International Business. Annual Meeting. Proceedings
    Volume54
    ISSN2078-4430

    Cite this

    Møller Larsen, M., Geisler Asmussen, C., & Pedersen, T. (2012). Whether or Not to Prepare for Offshoring: A Simulation Study. In S. Feinberg, & T. Kiyak (Eds.), Proceedings of the 54rd Annual Meeting of the Academy of International Business (pp. 81). Academy of International Business. Academy of International Business. Annual Meeting. Proceedings, Vol.. 54 http://aib.msu.edu/events/2012/AIB2012_ConferenceProceedings.pdf