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Integration Decisions When Outsourcing, Offshoring, and Distributing Knowledge Work

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Abstract

This paper surveys the literature and develops a framework for research into the integration of distributed knowledge work. Knowledge work is considered to be distributed whenever it is executed in a context in which key decisions cross organizational boundaries, such as occurs in outsourcing, offshoring, or open-source arrangements. The growth of such arrangements in recent years is well-documented. Nonetheless, research into maintaining the coherence of a distributed knowledge work project from initiation to customer delivery, often referred to as supply chain integration or simply “integration,” is in a nascent state. As part of the special issue to encourage further research into this topic, we review the relevant literature from operations, service, and information management, organizational theory, and engineering design. We then pry open the “black box” of integration by inductively organizing the key decisions identified by this literature with respect to contract, organization, work, and infrastructure design of the knowledge work project. Finally, we contrast this approach with prior research frameworks, identify key topics for future study, and describe how the papers in this special issue address some of these questions.

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... The use of partners in R&D projects and the challenges associated with managing partners has been a topic of considerable interest in the R&D management literature (e.g., Clark and Fujimoto, 1991;Eisenhardt and Tabrizi, 1995;Swink, 2006). In this section, we review studies relating to the scale and scope of collaboration efforts in R&D projects, identify and summarize the gaps in this literature, and discuss how our study attempts to address these gaps. 2 In terms of partnering scale, majority of research has investigated collaboration structures between a firm and a single partner (i.e., a dyad) at the project-level of analysis (Anderson et al., 2013;Peng et al., 2013). Such a focus does not address the unique coordination challenges associated with the use of multiple partners, as described earlier. ...
... Beyond moderate levels, task partitioning might blind partners to important system level interdependencies, and create difficulties in synchronizing and integrating partner efforts. The result of such difficulties is slower market penetration and, hence, reduced revenues from partnering efforts (Ethiraj, 2007;Anderson and Parker, 2013). ...
... These gaps in knowledge can create significant challenges while integrating different components and modules especially during the execution stages (Swink, 2006;Anderson et al., 2013). They can also limit a project's ability to deliver on the functional and technical requirements, lessening their market performance. ...
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Chapter
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Increasingly, firms source more complex and strategic as well as harder to codify information technology projects to low-cost offshore locations. Completing such projects successfully requires close collaboration among all participants. Yet, achieving such collaboration is extremely difficult because of the complexity of the context: multiple and overlapping boundaries associated with diverse organizational and national contexts separate the participants. These boundaries also lead to a pronounced imbalance of resources among onshore and offshore contributors giving rise to status differences and inhibiting collaboration. This research adopts a practice perspective to investigate how differences in country and organizational contexts give rise to boundaries and associated status differences in offshore application development projects and how these boundaries and status differences can be renegotiated in practice to establish effective collaboration. To illustrate and refine the theory, a qualitative case study of a large financial services firm, which sourced a variety of high-end IT work to its wholly owned subsidiaries ("captive centers") and to third party vendors in multiple global locations (in particular, to India and Russia), is presented. Using a grounded theory approach, the paper finds that differences in country contexts gave rise to a number of boundaries that inhibited collaboration effectiveness, while differences in organizational contexts were largely mediated through organizational practices that treated vendor centers and captive units similarly. It also shows that some key onshore managers were able to alleviate status differences and facilitate effective collaboration across diverse country contexts by drawing on their position and resources. Implications are drawn for the theory and practice of global software development and multiparty collaboration.
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Firms are building collaborative relationships with their supply chain partners in order to achieve efficiencies, flexibility, and sustainable competitive advantage. However, it is unclear if collaborative relationships provide benefits that compensate for the additional expense associated with such relationships. Further, it is unclear what factors promote successful collaborations. This research examines collaborative relationships in two separate studies using structural equation modeling: one study examines buyers’ perceptions and the second study examines suppliers’ perceptions. The two studies are then compared using invariance testing in order to determine economic and relational factors that drive satisfaction and performance from each party’s perspective. Results show that collaborative activities, such as information sharing, joint relationship effort, and dedicated investments lead to trust and commitment. Trust and commitment, in turn, lead to improved satisfaction and performance. Results from the two independent studies exhibit similarities and differences; while the conceptual model is highly similar, certain paths vary in their significance and/or their importance across buyer and supplier firms such that buyers focus more on relationship outcomes while suppliers look to safeguard their transaction specific investments through information sharing and joint relationship effort. Managerial and theoretical implications of the findings are discussed.
Article
Uncertainty in new product development (NPD) planning embraces market, creative, technological, and process dimensions to a much greater extent than in non-NPD project planning. Yet, NPD management is becoming increasingly decentralized, both within the firm and across the supply chain. Hence, planning for NPD uncertainty often results in path-dependent scenarios cutting across the strategic, tactical, and operational levels of planning. To coordinate this resulting complexity, we propose a stochastic hierarchical product development planning framework with multiple recourses, i.e., corrective actions, to maximize performance across a firm's entire NPD program. We also argue the necessity for a fourth planning level, the infrastructural, that reestablishes norms for market projections, technological forecasts, scheduling, and requirements as latent uncertainty in the environment is continually revealed. An illustration from the automotive industry is presented to demonstrate a deployment of our framework. We additionally discuss the applicability of this framework for managing NPD capabilities over time.
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The services sector has grown over the last 50 years to dominate economic activity in most advanced industrial economies, yet scientific understanding of modern services is rudimentary. Here, we argue for a services science discipline to integrate across academic silos and advance service innovation more rapidly.
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Lessons from 50 IT-outsourcing efforts show that unforeseen costs can undercut anticipated benefits. Understanding the issues can lead to better outsourcing decisions.
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Studies have shown the knowledge transfer problems that arise when communication and storage technologies are employed to accomplish work across time and space. Much less is known about knowledge transfer problems associated with transformational technologies, which afford the creation, modification, and manipulation of digital artifacts. Yet, these technologies play a criticalrole in offshoring by allowing the distribution of work at the task level, what we call task-based offshoring. For example, computer-aided engineering applications transform input like physical dimensions, location coordinates, and material properties into computational models that can be shared electronically among engineers around the world as they work together on analysis tasks. Digital artifacts created via transformational technologies often embody implicit knowledge that must be correctly interpreted to successfully act upon the artifacts. To explore what problems might arise in interpreting this implicit knowledge across time and space, and how individuals might remedy these problems, we studied a firm that sent engineering tasks from home sites in Mexico and the United States to an offshore site in India. Despite having proper formal education and ample tool skills, the Indian engineers had difficulty interpreting the implicit knowledge embodied in artifacts sent to them from Mexico and the United States. To resolve and prevent the problems that subsequently arose, individuals from the home sites developed five new work practices to transfer occupational knowledge to the offshore she. The five practices were defining requirements, monitoring progress, fixing returns, routing tasks strategically, and filtering quality. The extent to which sending engineers in our study were free from having to enact these new work practices because on-site coordinators acted on their behalf predicted their perceptions of the effectiveness of the offshoring arrangement, but Indian engineers preferred learning from sending engineers, not on-site coordinators. Our study contributes to theories of knowledge transfer and has practical implications for managing task-based offshoring arrangements.
Article
While prior research has found that familiarity is beneficial to team performance, it is not clear whether different kinds of familiarity are more or less beneficial when the work has different types of complexity. In this paper, we theorize how task and team familiarity interact with task and team coordination complexity to influence team performance. We posit that task familiarity is more beneficial with more complex tasks (i.e., tasks that are larger or with more complex structures) and that team familiarity is more beneficial when team coordination is more difficult (i.e., for larger or geographically dispersed teams). Finally, we propose that the effects of task familiarity and team familiarity on team performance are complementary. Based on a field study of geographically distributed software teams, two of our hypotheses are disconfirmed: Our results show that the beneficial effects of task familiarity decline when tasks are more structurally complex and are independent of task size. Conversely, the hypotheses for team familiarity are confirmed as the benefit of team familiarity for team performance is enhanced when team coordination is more challenging-i.e., when teams are larger or geographically dispersed. Finally, surprisingly, we find that task and team familiarity are more substitutive than complementary in their joint effects on team performance: Task familiarity improves team performance more strongly when team familiarity is weak and vice versa. Our study contributes by revealing how different types of familiarity can enhance team performance in a real-world setting where the task and its coordination can be highly complex.
Article
Knowledge differences impede the work of cross-functional teams by making knowledge integration difficult, especially when the teams are faced with novelty. One approach in the literature for overcoming these difficulties, which we refer to as the traverse approach, is for team members to identify, elaborate, and then explicitly confront the differences and dependencies across the knowledge boundaries. This approach emphasizes deep dialogue and requires significant resources and time. In an exploratory in-depth longitudinal study of three quite different cross-functional teams, we found that the teams were able to cogenerate a solution without needing to identify, elaborate, and confront differences and dependencies between the specialty areas. Our analysis of the extensive team data collected over time surfaced practices that minimized members’ differences during the problem-solving process. We suggest that these practices helped the team to transcend knowledge differences rather than traverse them. Characteristic of these practices is that they avoided interpersonal conflict, fostered the rapid cocreation of intermediate scaffolds, encouraged continued creative engagement and flexibility to repeatedly modify solution ideas, and fostered personal responsibility for translating personal knowledge to collective knowledge. The contrast between these two approaches to knowledge integration—traverse versus transcend— suggests the need for more nuanced theorizing about the use of boundary objects, the nature of dialogue, and the role of organizational embeddedness in understanding how knowledge differences are integrated
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http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1946468
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Service provider opportunism is widely noted as a principal risk with outsourcing. Indeed, economic theory regarding the factors which influence the outsourcing decision, treats opportunism as a core behavioral assumption. It is assumed that if given the opportunity, outsourcing providers will act in a self-serving manner despite the potentially negative impact it may have on their customer. Other researchers have suggested that opportunism is not an unwavering human behavior, but rather can be substantively influenced by the management practices which define the relationship. Building on these arguments, this study investigates the validity of these divergent positions. Hierarchical linear regression is used to examine dyadic data on 102 information technology, logistics, and other business process outsourcing relationships. We test a model which hypothesizes that the buying firm's reliance on different bases of inter-firm power will have differing effects on the risk of opportunism (shirking and poaching). These hypotheses are evaluated while concurrently examining the influence of exchange hazards (relationship-specific investments and technological uncertainty) on provider shirking and poaching. The results offer strong evidence that buyer reliance on mediated forms of power (i.e. rewards, coercive, legal legitimate) enhance the risk of both provider shirking and poaching, while non-mediated power (i.e. expert, referent) is associated with a diminished level of opportunistic behavior. Interestingly, relationship-specific investments have a significant effect on some forms of opportunistic behavior but not on other forms of opportunistic behavior. Technological uncertainty did not have a significant impact on provider opportunism.
Article
Collaboration is an essential element of new product development (NPD). This research examines the associations between four types of information technology (IT) tools and new product development (NPD) collaboration. The relationships between NPD practices and NPD collaboration are also examined. Drawing on organizational information processing theory, we propose that the relationships between IT tools and NPD collaboration will be moderated differently by three project complexity dimensions, namely product size, project novelty, and task interdependence, due to the differing nature of information processing necessitated by each project complexity dimension. Likewise, the moderation effects of the project complexity dimensions on the relationship between NPD practices and NPD collaboration will also be different. We test our hypotheses using data from a sample of NPD projects in three manufacturing industries. We find that IT tools are associated with collaboration to a greater extent when product size is relatively large. In contrast, IT tools exhibit a smaller association with collaboration when project novelty or task interdependence is relatively high. NPD practices are found to be more significantly associated with NPD collaboration under the contingency of high project novelty or high task interdependence. The findings provide insights about circumstances where several popular IT tools are more likely to facilitate collaboration, thus informing an NPD team’s IT adoption and use decisions.
Article
â–º We analyze the specific moral hazard problem in ad-hoc, market-distant, inter-firm collaboration. â–º We analyze the relevance and applicability of potential organizational instruments in this case. â–º We give reasons for the assumption that the theoretical model of incomplete contracts can be effectively implemented by an ex-ante in-principle-assignment of patent ownership rights to the supplier. â–º In our study of 113 cross-sectional cases, we test this assumption for the first time, and find it confirmed. â–º The results also show the ineffectiveness of the instrument of milestone-dependent payments that was tested because of its widespread usage in management practice.
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What types of human and social capital identify the emergence of leaders of open innovation communities? Consistent with the norms of an engineering culture, we find that future leaders must first make strong technical contributions. Beyond technical contributions, they must then integrate their communities in order to mobilize volunteers and avoid the ever-present danger of forking and balkanization. This is enabled by two correlated but distinct social positions: social brokerage and boundary spanning between technological areas. An inherent lack of trust associated with brokerage positions can be overcome through physical interaction. Boundary spanners do not suffer this handicap and are much more likely than brokers to advance to leadership. The research separates the influence of human and social capital on promotion, and highlights previously unexamined differences between brokerage-and boundary-spanning positions. Longitudinal analyses of careers within the Internet Engineering Task Force community from 1986--2002 support the arguments.
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The design of work has been and will continue to be a central problem challenging organization theory and practice. The system of arrangements and procedures for doing work affects all workers every day throughout the world. Work is changing dramatically. In an increasingly global and knowledge-intensive economy, work design is no longer contained within an organization; it often transcends the boundaries of organizations and countries. These changes call for a renewed research focus on work design. Building on configuration and complexity perspectives, we propose a framework for studying work design. We argue that three issues require attention to advance the knowledge of work design: (1) defining the boundaries of work systems, (2) examining how the system is nested in a hierarchy within and between organizations, and (3) determining interactions between the elements of a work system. We propose a method of frontier analysis for identifying equifinal designs - the set of equally effective work designs for different combinations of inputs (situations or contexts) and outputs (performance criteria). When work designs are examined longitudinally, these methods permit an examination of adaptation processes on changing fitness landscapes, suggesting how work systems may increase, decrease, or sustain their relative performance over time.
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We utilize research on alliance governance structures and on new product development to study how partners working under an existing alliance governance structure will organize a new product development project. Initially, we consider a contractual alliance doing multiple projects and argue that the critical organization decisions for any project are whether one or both partners should be involved, whether the partners should work with little or considerable interaction, and whether decision-making authority should reside in a project manager or be consensual. Based on the answers to these questions, we identify at least four viable project organization options. We next examine the option that would be selected under conditions involving the alliance's newness, whether a cooperative history exists, and the distribution of skills for the project. Under each condition, we compare the costs and benefits of the options with respect to the underlying transaction costs, potential for learning, and the ability to contribute to developing a social relations network. By allowing variations in time-to-market pressures, the tacit knowledge that a partner can obtain from the project, and the partners' need to work closely together on future projects, we can determine the points at which costs and benefits indicate a switch from one organization option to another. Finally, we indicate how to adjust the theory for it to apply to a contractual alliance doing only one project and to an institutional alliance such as a joint venture.
Article
In recent years concurrent, overlapping development activities of engineering tasks have proved to be a cost-effective and time-efficient way to build products geared toward meeting the demands of a competitive and quality-conscious market. In this study, we examine the structure and dynamics of a software project in information technology industrial research and development that has this methodology as its foundation. We first describe a number of software engineering aspects of the project that elucidate how various development activities in its concurrently unfolding component projects are overlapped and integrated to gradually build the product over time. Using the mathematical tools of dynamic systems analysis, we next derive a number of results that characterize the long-term, stable behavior of the project. These results are then used in a numerical simulation to illustrate a procedure by which relevant resources can be distributed across the components in a way that maintains continued stability of the project over time. Our modeling approach is flexible enough to allow the theoretical results and the simulation techniques to be easily generalized to study, in real time, the stability, maintenance, and management of similar concurrent projects. The usefulness of the method lies in motivating and refining managerial decisions that drive overlapping development activities of such projects.
Article
In this paper we focus on the integration of strategic objectives and process knowledge that a manufacturing factory collects from its external interfaces. Using data from a variety of manufacturing industries, this study examines four different types of strategic integration at the manufacturing plant level. We use a path analytic approach to simultaneously assess the contributions of the various types of integration to manufacturing-based competitive capabilities and business level performance. In addition, we examine the intervening roles that manufacturing-based competitive capabilities play in mediating the relationships between strategic integration and business performance. We find that each type of integration activity has unique benefits and detriments. These findings extend prior studies of manufacturing and supply chain integration by broadening the theory relating to strategic integration. The results also provide implications for manufacturing managers who seek to design integration policies and associated resource deployments.
Article
Outsourcing has emerged as a prevalent business practice that is having a transformational impact on how many organizations manage their global supply chains. Despite this prominence, anecdotal reports from multiple reputable organizations suggest that many businesses fail to realize the benefits anticipated from their outsourcing initiatives. Motivated by these observations, this study investigates those management practices during the outsourcing process that are key drivers of outsourcing performance. Specifically, detailed data from 198 sourcing executives and managers responsible for outsourcing initiatives are used to investigate the influence that strategic evaluation, contractual completeness, and relationship management practices have on achieving projected outsourcing results. The results offer strong empirical evidence that outsourcing performance is significantly influenced by extensive strategic evaluation and proactive relationship management practices. Moreover, the impact strategic evaluation has on outsourcing performance is not direct, but rather is partially mediated by the relationship between the parties. Finally, the results show that contractual completeness does not distinguish between successful and unsuccessful outsourcing efforts, and can be considered qualifying activity.
Article
For many years, firms have been organizing supplier conferences, conducting on-site visits, and talking about the concept of joint buyer/supplier teams. It is believed that the implementation of these concepts enhances inter-firm relationships. Furthermore, as firms move towards closer and more integrated supply chains it is argued that socialization is an increasingly important mechanism in facilitating and enhancing the supply integration process. This paper has taken these activities and embedded them in the theory of ‘socialization’ and supply chain integration. The authors propose and test a model on how buyers can use the concepts of supply chain integration and socialization to achieve improved supplier communication and operational performance, and therefore, to improve the buyer's perceived level of the supplier's contractual conformance. The findings reveal that socialization is essential for the development of any significant business relationship and the enhancement of a supply integration strategy.
Article
The development of cheap and robust communications technologies has lowered the cost of conducting business transactions across international boarders and opened up low wage rate global labor markets to firms facing demand for cheap and efficient service delivery. A review of transaction cost theory and operations management models of service process disaggregation reveals parallels between the how firm boundaries are determined and how certain service process elements can be disaggregated from face-to-face customer contact. This theoretical background is used to identify challenges to the effective offshoring of service processes. The competitive capability literature offers suggestions as to how firms might acquire the internal capabilities required to manage offshore service processes. Propositions are developed on how the standardized transactional infrastructure of enterprise technologies (and the organizational competencies developed by successful enterprise system adopters) may help mitigate the challenges of offshore governance.
Article
Adopting a transformational offshore outsourcing perspective, we examine empirically the relationship among the motive to acquire tacit knowledge from outsourcing partners, formal and social control mechanisms, and innovation outcomes among Sino-foreign as well as local alliances. We constructed our theoretical model incorporating knowledge management, social exchange, and alliance risk perspectives, and hypothesized that motives to acquire partners’ tacit knowledge through offshore outsourcing will affect firm innovation via two forms of control, namely social control and formal control. Our empirical testing, utilizing two sub-samples composed of Sino-foreign offshore outsourcing alliances and local outsourcing alliances, respectively, reveals that the motive to acquire outsourcing partner's tacit knowledge and different control mechanisms are significant predictors of incremental and radical innovation outcomes, and that there are some intriguing differences between the Sino-foreign alliances and local alliances.
Article
This paper presents two complementary conceptual models that help shed light on the complexities of offshoring service and knowledge work. In developing the model, we draw upon existing literature in the realm of service operations and delivery and build on insights from allied areas such as management and practice. The models offer a simple yet powerful way to conceptualize offshoring of knowledge and service work and to identify the inherent challenges that such strategies entail. The evolutionary model of offshoring parallels well-established work in the manufacturing literature to present a sequential view of building organizational competence in offshoring. The implications of the conceptual models have been discussed in a range of propositions that can be viewed as foundations for new inquiry in this research stream.
Article
Offshoring service work is an accelerating trend. While the cost-savings from offshoring service work are usually clear, operating at a distance also brings with it certain “invisible costs.” We combine existing service operations theory with insights from the literature on communications and culture to present a new conceptual framework, organized around interaction intensity and interaction distance. We identify the drivers of these costs. We conclude with recommendations for controlling or attenuating invisible costs in offshoring service work.