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3 - A theory of the outsourcing firm

Published online by Cambridge University Press:  10 January 2011

By
Dave Luvison  and
Mike Bendixen
Edited by
Farok J. Contractor ,
Vikas Kumar ,
Sumit K. Kundu  and
Torben Pedersen
Dave Luvison
Affiliation:
Nova Southeastern University
Mike Bendixen
Affiliation:
Nova Southeastern University
Farok J. Contractor
Affiliation:
Rutgers University, New Jersey
Vikas Kumar
Affiliation:
University of Sydney
Sumit K. Kundu
Affiliation:
Florida International University
Torben Pedersen
Affiliation:
Copenhagen Business School
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Summary

Introduction

Outsourcing has evolved into a significant organizational practice over the last decade (Hoecht and Trott, 2006). However, as firms expand the practice by outsourcing increasingly key and core functions, new management challenges can be anticipated. The organizational changes that accompany these challenges are likely to be sweeping, suggesting that it is now appropriate to consider the need for a comprehensive behavioral theory of the outsourcing firm.

Both transaction cost economics (TCE) and the resource-based view of the firm (RBV) have been useful perspectives to investigate the determinants and conditions under which firms can best leverage outsourcing (Holcomb and Hitt, 2007; McIvor, 2009). Transaction cost economics provides clear direction as to economic trade-offs and contracting styles that a firm can use to evaluate the consequences of a potential outsourcing decision (Williamson, 2008). Similarly, the resource-based view highlights how unique capabilities of the firm can offer advantage when appropriately matched to environmental conditions (Peteraf, 1993); this has made it an effective measure to determine the extent to which a firm's competencies can and should be outsourced (Jennings, 2002; McIvor, 2003).

While TCE and RBV offer helpful vehicles for measuring the efficiencies gained through outsourcing, they offer a less helpful look into the organizational changes that occur within the firm as it outsources an increasingly larger percentage of its functionality to external contract providers.

Type
Chapter
Information
Global Outsourcing and Offshoring
An Integrated Approach to Theory and Corporate Strategy
 , pp. 73 - 104
Publisher: Cambridge University Press
Print publication year: 2010

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