Managing Tacit Knowledge in Strategic Outsourcing

Abstract

The globalization of modern economies and transition to integral knowledge society brings along complex issues of mastering outsourced activities, especially in managing tacit dimensions of knowledge transfer that takes place in outsourcing relationships. Relationships can be divided into several groups, among which the traditional and strategic ones are the most distinguished (Reuvid & Hinks, 2001; Espino-Rodriguez & PadronRobaina, 2004; Linder, 2004). Traditional outsourcing is interpreted as a relationship in which the outsourcing provider can perform only well-controlled activities. This mindset has changed over the time due to fact that outsourcing providers usually have significant capabilities and a higher level of knowledge than outsourcers. Consequently, traditional outsourcing has evolved and transformed into problem solving (strategic) outsourcing (Linder et al., 2002), which seeks to achieve major changes in the company’s performance (e.g., changes in business processes, access to new technology, innovation, productivity improvements) and is mostly based on long-term cooperation between companies that often develops into a business partnerships. Such outsourcing also enables companies to fully exploit investments of external providers, their innovations, and specialized skills and knowledge that would otherwise be very costly and almost impossible to replicate within company. In strategic outsourcing objectives and relationships between participants become very important; consequently, tacit knowledge dimensions (Polanyi, 1958, 1966; Howels, 1996; Rebernik & Sirec, 2007) should be appropriately managed. This chapter discusses some fundamental issues related to the importance of knowledge management in the outsourcing relationship. Managing the outsourcing relationship is incorporated primarily in the outsourcing process itself, and no special attention is paid to it, although it is crucial for the effectiveness of the outsourcing relationship. Such an approach neglects the importance of governing, supervising, and developing the relationship with the outsourcing provider, particularly because the outsourcing literature relates mainly to large companies (Rebernik & Bradac, 2009). A considerable number of organizations have had negative experiences with outsourcing because no relationship management had been established; this is an area in which a great deal of effort should be applied during the outsourcing process (Embelton & Wright, 1998). Rather, organizations have tended to establish teams of employees who govern the outsourcing process. In this process, participants involved in outsourcing activities share various information and exchange different types of knowledge and skills. Not only do they learn from each other,