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

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  • Peter Maskell
  • Torben Pedersen
  • Bent Petersen
  • Jens Dick-Nielsen

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.

Suggested Citation

  • Peter Maskell & Torben Pedersen & Bent Petersen & Jens Dick-Nielsen, 2005. "Learning Paths to Offshore Outsourcing - From Cost Reduction to Knowledge Seeking," DRUID Working Papers 05-17, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    • Handle: RePEc:aal:abbswp:05-17
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    References listed on IDEAS

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    More about this item

    Keywords

    Offshore outsourcing; cost reduction; innovation; experiential learning; low-cost countries;
    All these keywords.

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • M55 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Contracting Devices

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