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Learning Paths to Offshore Outsourcing: From Cost Reduction to Knowledge Seeking

Peter Maskell, Torben Pedersen, Bent Petersen and Jens Dick-Nielsen

Industry and Innovation, 2007, vol. 14, issue 3, 239-257

Abstract: A corporation's offshore outsourcing may be seen as the result of a discrete, strategic decision taken in response to an increasing pressure from worldwide competition. However, empirical evidence of a representative cross-sector sample of international Danish firms indicates that offshore sourcing in low-cost countries is best described as a learning-by-doing process in which the offshore outsourcing of a corporation goes through a sequence of stages towards sourcing for innovation. Initially, a corporation's outsourcing is driven by a desire for cost minimization. Over a period of time the outsourcing experience lessens the cognitive limitations of decision-makers as to the advantages that can be achieved through outsourcing in low-cost countries: the insourcer/vendor may not only offer cost advantages, but also quality improvement and innovation. The quality improvements that offshore outsourcing may bring about evoke a realization in the corporation that even innovative processes can be outsourced.

Keywords: Offshore outsourcing; cost reduction; innovation; experiential learning; low-cost countries (search for similar items in EconPapers)
Date: 2007
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