Uncovering the hidden costs of offshoring: the interplay of complexity, organizational design and experience

Larsen, Marcus M., Manning, Stephan and Pedersen, Torben (2013) Uncovering the hidden costs of offshoring: the interplay of complexity, organizational design and experience. Strategic Management Journal, 34 (5). pp. 533-552. ISSN 0143-2095

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Abstract

This study investigates estimation errors due to hidden costs—the costs of implementation that are neglected in strategic decision-making processes—in the context of services offshoring. Based on data from the Offshoring Research Network, we find that decision makers are more likely to make cost-estimation errors given increasing configuration and task complexity in captive offshoring and offshore outsourcing, respectively. Moreover, we show that experience and a strong orientation toward organizational design in the offshoring strategy reduce the cost-estimation errors that follow from complexity. Our findings contribute to research on the effectiveness of sourcing and global strategies by stressing the importance of organizational design and experience in dealing with increasing complexity.

Item Type: Article
Keywords: Hidden costs, offshoring, complexity, estimation errors, organizational design
Schools and Departments: University of Sussex Business School > Business and Management
Subjects: H Social Sciences > H Social Sciences (General)
Related URLs:
Depositing User: Stephan Manning
Date Deposited: 27 Sep 2019 09:02
Last Modified: 27 Sep 2019 09:15
URI: http://sro.sussex.ac.uk/id/eprint/86261

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