Outsourcing Strategies of Established Firms and Sustainable Competitiveness: Medical Device Firms

Byungjoo Paek,Joonyoung Park,Joohyun Kim,Heesang Lee

doi:10.3390/su11174550

Abstract

Successful outsourcing strategy is a key enabler of sustainable competitiveness of established firms engaged in technology-intensive business. This study proposes a research framework of a successful outsourcing process composed of resources, dynamic capabilities and created values, from a review of relevant literature and in-depth case study of four leading medical device firms. The research results specify four outsourcing types according to the characteristics of outsourced resources, and their alignment with resources owned by the outsourcer. Each type of outsourcing is positively affected by the outsourcer’s dynamic capabilities, namely sensing, integrating capability, absorptive capability and technology transfer capability. In addition, the significance of the outsourcee’s size according to each outsourcing type is also found. As a result of successful outsourcing experience, the outsourcer can reap the benefits of enhanced dynamic capabilities, i.e., market-oriented innovation, strategic flexibility, agility and increased efficiency, thereby creating a virtuous cycle of sustainable competitiveness in a volatile environment.

Highlights

As modern firms are confronted with higher levels of complexity and uncertainty, it is significant for the firms to adjust their capabilities to cope with environmental change for sustainable competitive advantages [1]
According to Transaction Cost Economics (TCE), the costs associated with economic exchange play a leading role in the outsourcing decision, and the transactions are made through the governance form requesting minimum costs [11,12]
Some studies support that a resource and competence-based perspective should complement TCE to analyze outsourcing activities, because a firm’s inherent capability and strategic orientation, as well as cost efficiency, affect outsourcing decisions; and TCE alone is insufficient to explain the dynamics of governance in the outsourcing process [12,16,17]

Summary

Introduction

As modern firms are confronted with higher levels of complexity and uncertainty, it is significant for the firms to adjust their capabilities to cope with environmental change for sustainable competitive advantages [1] In such unpredictable business environments, in order to enhance their competitiveness, many established firms continuously utilize external resources, as well as internal capabilities [2]. The outsourcing firms can transform themselves into more flexible and agile organizational structures [6,7] For these reasons, an increasing number of firms have adopted outsourcing strategies, seeking enhanced efficiency and competitiveness, and a topic of strategic outsourcing is increasingly widespread among modern organizations, thereby attracting great interest from organizational scholars, as well as firm management [3,6,8,9,10]. Some studies support that a resource and competence-based perspective should complement TCE to analyze outsourcing activities, because a firm’s inherent capability and strategic orientation, as well as cost efficiency, affect outsourcing decisions; and TCE alone is insufficient to explain the dynamics of governance in the outsourcing process [12,16,17]

Methods

Results

Conclusion