Advanced service offshore outsourcing: Exploring the determinants of capability development in emerging market firms

• Published date: 01 May 2018
• Author: Manya Jaura Lind,Kristin Brandl,Peter D. Ørberg Jensen
• DOI: http://doi.org/10.1002/gsj.1192
• Date: 01 May 2018

RESEARCH ARTICLE

Advanced service offshore outsourcing: Exploring

the determinants of capability development in

emerging market firms

Kristin Brandl

1

| Peter D. rberg Jensen

2

| Manya Jaura Lind

3

1

Gustavson School of Business, University of

Victoria, Victoria, Canada

2

Department of Strategic Management and

Globalization, Copenhagen Business School,

Frederiksberg, Denmark

3

Department of Innovation and Organizational

Economics, Copenhagen Business School,

Frederiksberg, Denmark

Correspondence

Peter D. rberg Jensen,Department of Strategic

Management and Globalization, Copenhagen

Business School, Kilevej 14A, office 2.61, 2000

Frederiksberg, Denmark.

Email: poe.smg@cbs.dk

Research Summary:We analyze the effect of offshored

service task types on the development of capabilities in

emerging market service provider firms. Using multiple

case studies, we find that, dependent on task interdepen-

dent service types, implying different client interactions

(firm-external determinants), organizational capabilities

are developed. More specifically, reciprocal task interde-

pendent services generate human capital and management

capabilities, while sequential task interdependent services

generate organizational capital and management capabili-

ties. Moreover, we find a relationship between the capa-

bilities, where the deficient development of one

capability can be mitigated by the development of

another capability (firm-internal determinants). Grounded

in organization and service production theory, the article

contributes to the thematic literature on service offshoring

and the literature on organizational capabilities, with a

particular focus on emerging market firms.

Managerial Summary:Offshore outsourcing of advanced

services is contributing to the development of capabilities

for client firms, but is also expected to benefit service

provider firms from emerging markets. Thus, we study

how offshore outsourcing of services contributes to the

development of these capabilities for service provider

firms. We find that the characteristics of the services,

which are causing different interactions with the client,

help the firm develop a variety of capabilities. These

capabilities affect the management, employees, and orga-

nization of service provider firms. Although the devel-

oped competencies are not a solution for all business

development challenges of emerging market firms, the

Received: 17 May 2016 Revised: 31 October 2017 Accepted: 3 November 2017

DOI: 10.1002/gsj.1192

Copyright © 2017 Strategic Management Society

324 wileyonlinelibrary.com/journal/gsj Global Strategy Journal. 2018;8:324–350.

implications of this study could lead to competitive

advantages for the firms if fully explored and exploited.

KEYWORDS

capability development, emerging market firm,

offshoring, organizational learning, services

1|INTRODUCTION

The continuous global integration of firms and markets reflects the widening range and steady

growth of services sourcing, including that of advanced services, such as R&D, consulting, legal,

and financial services. The United Nations Commission on Trade and Development (UNCTAD,

2004) categorizes this sourcing of “high-skill services”to be “the most creative and skill-intensive

end of offshored services”(UNCTAD, 2004, p. 151). In practice, this implies that the execution of

work requires highly educated staff, with skills that match content requirements of the work (see

Jensen, 2012; Kumar, van Fenema, & von Glinow, 2009 for earlier discussions on this topic).

The development is noteworthy, and studies (cf. Larsen, Manning, & Pedersen, 2013) indicate

that advanced service offshoring is increasing due to the co-evolution of a range of enabling factors

(Laursen & Santangelo, 2017; Lewin & Volberda, 2011). Firms from emerging markets, such as

India, have especially been associated with the growth of service offshore outsourcing. For example,

the Indian service provider Infosys offers a variety of advanced services, from financial equity to

market research services and operates in 30 countries (Infosys, 2016; Khanna & Palepu, 2004).

However, we do not know much about the organizational capabilities required to offer these

advanced services, as extant research focused predominantly on client firms and their reasons for

and the benefits of offshoring (e.g., Larsen et al., 2013). Key aspects pertaining to service provider

firms remain understudied topics (e.g., Jensen, 2012). Moreover, service providers have been con-

sidered largely as subordinate players in the client–service provider relationship (a notable exception

is Luo, Wang, Zheng, & Jayaraman, 2012), especially in an international business context. Previous

research on internationalized services, also with regard to intangible, firm-specific assets, has mainly

addressed questions concerning the transfer of tacit knowledge across national boundaries

(e.g., Grant, Almeida, & Song, 2000; Kogut & Zander, 2010), foreign entry/operation modes as a

way to overcome liability of foreignness and location-specific disadvantages (e.g., Anand & Delios,

1997), and the internationalization of service providers (e.g., Ball, Lindsay, & Rose, 2008).

In addition, international business literature fails to acknowledge service characteristics such as

task type differences and their impact on the production of services (for a similar argumen t, see Ball

et al., 2008). Service characteristics and task-focused research on international services is seldom

undertaken, and the dominant focus remains on the firm level (see Brandl, 2017 and Brandl, Mol, &

Petersen, 2017 as exceptions). Consequently, this study positions the service provider firm from

emerging markets as a central and equal partner in offshore outsourcing and adopts a task-based per-

spective on service characteristics. We study the effect of offshored service task types on the devel-

opment of capabilities in emerging market service provider firms.

To study the influence of task types in advanced services, we use Thompson’s (1967) seminal

definitions of task interdependencies and distinguish between service production processes that are

BRANDL ET AL.325