Transformational offshore outsourcing: Empirical evidence from alliances in China

Abstract

Adopting a transformational offshore outsourcing perspective, we examine empirically the relationship among the motive to acquire tacit knowledge from outsourcing partners, formal and social control mechanisms, and innovation outcomes among Sino-foreign as well as local alliances. We constructed our theoretical model incorporating knowledge management, social exchange, and alliance risk perspectives, and hypothesized that motives to acquire partners’ tacit knowledge through offshore outsourcing will affect firm innovation via two forms of control, namely social control and formal control. Our empirical testing, utilizing two sub-samples composed of Sino-foreign offshore outsourcing alliances and local outsourcing alliances, respectively, reveals that the motive to acquire outsourcing partner's tacit knowledge and different control mechanisms are significant predictors of incremental and radical innovation outcomes, and that there are some intriguing differences between the Sino-foreign alliances and local alliances.