Service outsourcing and its effects on knowledge

Purpose The purpose of the paper is to identify changes in different types of knowledge in a service outsourcing relationship as knowledge is transferred from the client to the provider, which correspond to the research question that guides the paper: ‘What are the effects on knowledge types when parts of service production are outsourced to a third party and knowledge is transferred?’. To answer this question we explored changes in both tacit and explicit knowledge taking place in several service outsourcing relationships. Design/methodology/approach A case study approach is chosen, as data is obtained from multiple levels. We studied four service outsourcing relationships, with outsourcing providers and outsourcing clients based in Europe and South-east Asia. Findings It is possible to identify two major changes as service outsourcing is conducted. (1) There is a change of relative importance of knowledge types; there is an increased emphasis on explicit knowledge as opposed to tacit knowledge. This is (2) caused partly due to the transfer situation and partly due to a focus on efficient mass production and a standardisation and industrialisation of the service. The focus on explicit knowledge leads to a loss of tacit knowledge. Research limitations/implications Our research is limited in two ways. First, we examined two countries. Thus, there are opportunities for expansion into more settings. Second, our findings can be tested by survey-type research thereby increasing the sample. Practical implications In a service outsourcing relationship the emphasis is most often on explicit knowledge. This is beneficial in a transaction cost relationship with standardized tasks being transferred. However, the more complex tasks being transferred the more difficult it is to clearly specify what is going to be transferred as the knowledge becomes more tacit, calling for more long-term relationships with other mechanisms for knowledge transfer of tacit knowledge in place. As a manager one need to be able to distinguish which type of relationship is wanted. Originality/value This paper helps to clarify what happens in a transfer situation when outsourcing is conducted. Particularly we emphasize the importance of tacit knowledge – a dimension often neglected in research – opposed to solely emphasizing explicit knowledge.