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Reconceptualizing the Firm in a World of Outsourcing and Offshoring: The Organizational and Geographical Relocation of High-Value Company Functions

Farok J. Contractor, Vikas Kumar, Sumit K. Kundu and Torben Pedersen

Journal of Management Studies, 2010, vol. 47, issue s2, 1417-1433

Abstract: In the largest sense, global strategy amounts to (1) the optimal disaggregation or slicing of the firm's value chain into as many constituent pieces as organizationally and economically feasible, followed by (2) decisions as how each slice should be allocated geographically ('offshoring') and organizationally ('outsourcing'). Offshoring and outsourcing are treated as strategies that need to be "simultaneously" analysed, where just 'core' segments of the value chain are retained in-house, while others are optimally dispersed geographically, as well as dispersed over allies and contractors. This amounts to a reconsideration of the nature of the firm that captures the dynamic changes in global configuration and a reconsideration of what constitutes 'core' activities that need to be retained internally. The article proposes a new research agenda that searches for each firm's optimal degree of disaggregation and global dispersion given that further scattering of value chain activities entail benefits as well as increased complexity and costs. Copyright (c) 2010 The Authors. Journal of Management Studies (c) 2010 Blackwell Publishing Ltd and Society for the Advancement of Management Studies.

Date: 2010
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