Designing Global Sourcing Strategy for Cost Savings and Innovation: A Configurational Approach
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Designing Global Sourcing Strategy for Cost Savings and Innovation: A Configurational Approach Nidthida Lin1 Received: 6 March 2020 / Revised: 20 August 2020 / Accepted: 14 October 2020 © Springer-Verlag GmbH Germany, part of Springer Nature 2020
Abstract Despite the well-acknowledged benefits of global sourcing (e.g., location specific advantage) in the international business literature, research driven mainly by the transaction cost economics and resource based view has cautioned about its potential negative effects (e.g., hidden costs, hollowing out effect) which might offset its potential gain, leading to a failure to achieve expected outcome and capture the value created in global sourcing activities. We argue that this issue is primarily explained by the misalignment between a firm’s global sourcing strategy and value expected from its global sourcing activities. This study examines the role of global sourcing strategy on financial and innovation performance of global sourcing activities. Using a fuzzy set qualitative comparative analysis on 235 firms engaging in global sourcing of business service activities, we identify configurations of global sourcing strategy—concerning (1) disaggregation, (2) dispersion of activities and (3) governance structure—that lead to high financial and innovation performance. The findings suggest that global sourcing strategy leading to high financial performance differs largely from global sourcing strategy leading to high innovation. While most studies selectively focus on one or two components of global sourcing strategy, our study highlights the need for firms to jointly consider the combined effect of degree of disaggregation, degree of dispersion of business service activities and governance structure as well as taking into account the expected outcome when crafting their global sourcing strategy. Keywords Global sourcing · Offshoring · Global value chain · Cost savings · Innovation · Configurations
* Nidthida Lin [email protected] 1
Macquarie Business School, Macquarie University, Sydney, NSW, Australia
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N. Lin
1 Introduction Despite the critical role of global sourcing in revolutionizing how firms carry out their business process activities, we have observed mixed outcomes of success and failure in global sourcing activities. Various benefits including cost reduction (Ellram et al. 2008; Holcomb and Hitt 2007), access to global knowledge and skill (Lewin et al. 2009a; Lewin and Peeters 2006), increased innovation (Lewin et al. 2009a; Roza et al. 2011) and organizational flexibility (Massini et al. 2010) have driven firms to engage in global sourcing. However, many firms have come to realize that as their global sourcing portfolio becomes more complex they increasingly suffer from inefficiency in their global sourcing activities, which drives up the costs and leads to the failure to capture value expected from their global network of value chains (Barthelemy 2003; Dibbern et al. 2008; Jha et al. 2018; Larsen et al. 2012). The natu
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