Global Sourcing Strategy and Performance of Knowledge-Intensive Business Services: A Two-Stage Strategic Fit Model

Abstract

This research contributes to the understanding of global sourcing strategy of knowledge-intensive business services (KIBSs) by offering an explanation for the differential performance among firms, even when they use similar global sourcing strategies. Using a systems integrator as the sourcing firm's perspective, the authors argue that complex KIBSs involve a complicated mixture of interfaces in that the performance of an individual KIBS is insufficient in defining the overall performance of the integrated KIBS system. The theoretical framework uses a two-stage strategic fit model that emphasizes the conditions under which global sourcing of KIBSs influences performance. Firms that strategically coalign sourcing strategy with KIBS attributes for each KIBS activity should perform more effectively than firms that lack such a coalignment. After selecting an appropriate sourcing strategy, the firm's dynamic capabilities (i.e., absorptive capacity and integration capability) may accentuate or attenuate the performance of the strategy at the integrated KIBS system level. Thus, although managers may be tempted to source KIBSs globally to reduce labor costs, they must examine both the KIBS attributes and the firm's dynamic capabilities.