Stickiness in global sourcing: A longitudinal case study of stickiness in outsourcing art for video games in IO Interactive

Mikkel Vester Jacobsen

Student thesis: Master thesis

Abstract

In global sourcing, expected cost reductions or anticipated access to skilled labor are often eclipsed by difficulties in operations. Most firms report operational problems soon after the implementation begins: Quality is not as high as expected, the foreign partner does not deliver in time, or more effort than estimated is needed to communicate requirements back and forth. Operational difficulties or stickiness in global sourcing may, in worst cases, lead to delays in production and/ or reversal of sourcing decisions and ultimately severe financial losses. However, firms that persevere and stay with their global sourcing decisions continuously adjust their operations, and eventually the difficulties or stickiness in their global sourcing decreases. This research takes an activity based operational perspective on global sourcing in order to illuminate the causes of stickiness in global sourcing and how stickiness develops over time. The research is a case study that seeks answers to the research question: What factors cause stickiness in global sourcing and how does stickiness develop over time? To answer the research question, the Danish video game manufacturer IO Interactive’s outsourcing of computer animated art to China is studied. Since 2004 IO Interactive have outsourced parts of the activities involved in computer animated art production to partners in Shanghai and Suzhou, China. Over the years they have experimented with different outsourcing constellations to improve their work flow with the Chinese partner and to cope with the numerous operational issues that have emerged. Reviewing the global sourcing literature made it feasible to propose a model for explaining stickiness in global sourcing and to show how it develops over time. This model, the Longitudinal Model for Stickiness in Global Sourcing, is a synthesis of several theories on knowledge transfer, stickiness, strategic and operational global sourcing. It hypothesizes that for an activity sourced globally the activity attributes’ dynamics reduce stickiness over time. This means that it is the inherent nature of the activity, the activity’s attributes, that causes stickiness, and that the attributes’ dichotomies change over time in direction of reducing stickiness. The change agents are management decisions, contextual changes and experiential learning in the organization. The activity’s attributes are found to be the ‘variability’, ‘inseparability’, ‘tacitness’ and ‘interdependency’. To be able to verify the main hypothesis it is operationalized into four sub hypotheses, one for each activity attribute. Each of the sub hypotheses is tested empirically on the basis of the case findings in IO Interactive’s art outsourcing venture. For the most part, the tests show that the attributes cause stickiness, and that the dichotomies of the attributes over time change in direction of reducing stickiness. They also show how the above change agents facilitate the process. Therefore, the case findings verify the sub hypotheses and consequently the main hypothesis. In conclusion, the factors that cause stickiness in global sourcing are the dichotomies of the activity attributes and over time they develop in direction of reducing stickiness. These results are valid for the video game manufacturing industry and the research is meant as a building block in the direction of further understanding global sourcing operations in general and stickiness in global sourcing in particular. If the same results apply to other industries, it would mean that firms should consider operational stickiness as an integral part of their strategic decision on what to source globally.

EducationsMSc in Business, Language and Culture, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2012
Number of pages75