Cross-border Outsourcing Research Articles

Patterns of inconsistency: a literature review of empirical studies on the multinationality–performance relationship

PurposeThis study aims to understand the performance implications of when a business internationalizes. Many managers take the performance implications of internationalization for granted. Whether seeking a broader customer base or cost reduction through cross-border outsourcing, the overwhelming belief is that internationalization leads to higher profits.Design/methodology/approachThis paper offers a systematic review, content analysis and cross-tabulation analysis of 115 empirical studies from over 40 major journals in management, strategy and international business between 1977 and 2021. Focusing on research settings, sample characteristics, underlying theoretical approaches, measurements of key variables and moderators influencing the multinationality and performance relationship, this study offers a detailed account of definitions and effects.FindingsThe findings of this study suggest a tenuous connection between internationalization and performance. No strain of research literature conclusively identifies a consistent direct path from internationalization to performance. The context specificity of the relationship makes general declarations impossible.Research limitations/implicationsFuture researchers should recognize that internationalization is a process taking different forms, with no specific dominant form. General declarations are misleading. The focus should be on the process of internationalization rather than on the outcome.Originality/valueThis study contributes to the international business literature by exploring reasons for the inconsistent results and lack of consensus. Through a detailed account of definitions and effects, this paper explores the lack of consensus as well as the identified shapes of the relationship.

The influence of unilateral supplier transaction-specific investments on international buyer opportunism: empirical findings from local suppliers in China

PurposeThis study examines how unilateral supplier transaction-specific investments (TSIs), directly and indirectly, influence international buyer opportunism and the extent to which detailed contracts enable suppliers to safeguard against international buyer opportunism. The study also examines whether relationship length affects the efficacy of detailed contracts in cross-border outsourcing relationships.Design/methodology/approachThe hypotheses are tested by using data collected from multiple informants working for 229 manufacturing suppliers in China. Multiple regression with a three-way interaction is used to test the hypotheses.FindingsUnilateral supplier TSIs encourage international buyer opportunism through increased supplier dependence. Contract specificity negatively moderates the effect of supplier dependence on international buyer opportunism. This moderating effect is stronger in long-term cross-border buyer–supplier relationships than in short-term ones.Originality/valueThe current study extends the cross-border outsourcing literature by examining how emerging-market suppliers in a weak power position can proactively safeguard against international buyer opportunism by using detailed contracts. Our findings show that supplier dependence mediates the relationship between unilateral supplier TSIs and international buyer opportunism; detailed contracts, however, can help dependent suppliers safeguard against international buyer opportunism. In particular, the findings highlight the importance of long-term buyer–supplier relationships that enhance the efficacy of detailed contracts.

The Performance of the Single Market for Goods after 25 Years

This report quantifies the trade effects of the European integration, but also highlights potentials from further integration in goods markets by addressing existing weaknesses in the implementation and enforcement of the Single Market rules in terms of goods trade, competition as well as productivity and ultimately welfare at the disaggregated level of individual industries and countries. The analysis follows the tradition of earlier studies with a focus on mechanisms and expected benefits of increased trade predicted by traditional (trade) theory (pro-competitive effects of market opening and efficiency gains through economies of scale and increased specialisation according to comparative advantages), but also provides an analysis of – so far less obvious – potential benefits stemming from improvements of institutional quality and its impact on comparative advantage and export specialisation and as a determinant of intra-EU production linkages via (intra-firm) vertical integration or cross-border outsourcing of inputs.

Matching governance mechanisms with transaction-specific investment types and supplier roles: An empirical study of cross-border outsourcing relationships

Drawing from transaction cost economics (TCE) and relational view (RV), we develop a contingency framework that matches governance mechanisms with different types of supplier transaction specific investments (TSIs) in cross-border outsourcing relationships. We further examine the three-way interaction effects between governance mechanisms, TSI types, and supplier roles in cross-border outsourcing relationships. Using data collected from 324 managers of local suppliers in China and 162 managers working for international buyers located in 15 different OECD countries, we find that while relational governance is more effective at safeguarding supplier human TSIs, it is not an effective solution for safeguarding supplier physical TSIs. In contrast, formal contracts help safeguard supplier physical TSIs against international buyer opportunism, but they are ineffective at safeguarding local supplier human TSIs. Moreover, we find that the interaction effect between formal contracts and supplier physical TSIs is stronger for original equipment manufacturers (OEMs) than for original design manufacturers (ODMs), whereas the interaction effect between relational governance and supplier human TSIs is stronger for ODMs than for OEMs. Theoretical and managerial implications of the findings follow.

VAT Implications of Outsourcing

This article, which is based on the authors’ presentations in Seminar A at the International Fiscal Association Congress held in Mumbai, India, in October 2014, examines the VAT issues that arise in the context of outsourcing and compares how different VAT and GST laws respond to these issues. In the context of cross-border outsourcing, the country approaches are measured against the standards set by the OECD in its International VAT/GST Guidelines.

Does mutual recognition of qualifications stimulate services trade? The case of the European Union

ABSTRACTThis article analyses the services trade impact of recognition of professional qualifications using a unique database compiled by the European Commission. It observes that there is large variation in the number of regulated professions across the EU. The number of recognitions is small relative to total employment in regulated professions. Nevertheless, a robust positive relationship between services trade and recognition of qualifications is found. Recognition stimulates two-way trade between the source and the host country, suggesting that arms-length exports as well as cross-border outsourcing take place. Recognitions in health and education professions are most strongly related to services trade.

Toll and Contract Manufacturing Structures – Strategies and Challenges for Cross-Border Outsourcing Activities

In this article, the author explains toll and contract manufacturing structures and their tax, trade and customs implications for principals, tollers and contractors.

Cross-Border Outsourcing – Issues, Strategies and Solutions

This article, which was drafted on the occasion of the 68th Congress of the International Fiscal Association in Mumbai, India, addresses tax-related issues, strategies and solutions regarding cross-border outsourcing.

Cross-Border Outsourcing – Issues, Strategies and Solutions

The economic benefits of cross-border outsourcing are by now well recognized. Despite political and social challenges, both the volume and the range of activities being outsourced have steadily increased. This article discusses tax issues that are seen as a key factor influencing commercial decisions on cross-border outsourcing.

Organisational learning, product quality and performance: the moderating effect of social ties in Chinese cross-border outsourcing

This study focuses on how government ties and financial ties as two important social ties in emerging countries differently moderate the relationships between two types of organisational learning (i.e., explorative learning and exploitative learning) and product quality. By using Chinese vendor samples in cross-border outsourcing, our empirical results show that product quality mediates the positive relationships between explorative and exploitative learning and financial performance. Furthermore, the moderating effects of government ties on the relationships between both two types of organisational learning and product quality are significantly positive. While financial ties positively moderate the relationship between exploitative learning and product quality, they negatively moderate the relationship between explorative learning and product quality.

Strategic Orientations, Knowledge Acquisition, and Firm Performance: The Perspective of the Vendor in Cross‐Border Outsourcing

abstractFrom the perspective of the vendors in emerging countries (VECs), this article investigates how the vendor firms in China respond to cross‐border outsourcing trends differently by examining the different effects of entrepreneurial orientation (EO) and market orientation (MO), as well as their interaction, on local vendors' acquisition of knowledge from foreign outsourcers in cross‐border outsourcing. We find that the knowledge acquisition of the vendors positively affects firm performance. Thus, the vendors need to correctly choose their strategic orientation to improve the knowledge acquisitions. Our results show the EO of the vendors has a positive effect on the knowledge acquisition, but the relationship between MO and the knowledge acquisition is an inverted U‐shape. Further, the interactive effect between EO and MO on the knowledge acquisition is positive. All these findings extend the literature in organizational learning and cross‐border outsourcing, and suggest that VECs should not only correctly choose their strategic orientation, but also pay more attention to the orientation interaction in acquiring knowledge from their partners through cross‐border outsourcing so that they can more efficiently improve their performance.

La réglementation des activités bancaires transfrontalières : la politique de la Nouvelle-Zélande en matière d'externalisation dans les banques

Regulating cross-border banking activity : New Zealand’s policy on outsourcing by banks This article discusses the Reserve Bank of New Zealand’s outsourcing policy for banks. Banks in New Zealand are increasingly outsourcing a substantial range of their business activities, both to independent and to related-party service providers, and both within New Zealand and across borders. Cross-border outsourcing is of particular relevance to New Zealand banking regulation, as the New Zealand banking system is dominated by banks owned by offshore parent banks that, to varying degrees, provide services to their banking subsidiaries. The article explains the motivation for the outsourcing policy in terms of the Reserve Bank’s prudential objectives, which include minimising the damage that could occur to the financial system in the event that a bank becomes distressed or fails. The outsourcing policy requires a large bank’s board to ensure that it maintains legal and practical control over outsourced functions sufficient to achieve a set of outcomes related to continued liquidity provision to the financial system. The policy is outcomes-focused and emphasises board and senior management responsibility for delivery. With its fairly narrow focus on a defined set of outcomes, the policy seeks to ensure that the Reserve Bank’s ability to manage crisis is not compromised, while making available to the financial system the benefits of association with foreign banks. JEL classification : G28, K23

Two Dimensions of Convergence: National and International Wage Adjustment Effects of Cross‐border Outsourcing in Europe

AbstractThe paper proposes a distinction between the two dimensions of convergence—within and between countries—when analyzing the impact of cross‐border outsourcing on real wage rates in the EU‐15 and the CEEC. In the CEEC, international outsourcing has not affected the adjustment of average real wage rates at the manufacturing industry level, but it has led to a closure of the gap within a typical EU economy. Between‐country convergence is likewise fostered by cross‐border outsourcing, supporting the hypothesis that outsourcing facilitates international factor price equalization.

Outsourcing and skill-specific employment in a small economy: Austria after the fall of the Iron Curtain

We set up a model, in which firms in a small industrialized country outsource part of their production to a foreign economy, which is rich in low-skilled labour. We analyse, how a decline in trade costs affects outsourcing activities and the production structure in the small economy. A stimulation of cross-border outsourcing raises wage dispersion and, if labour markets are unionized, also the employment of high-skilled relative to low-skilled labour. Using a panel of Austrian industries, we find, first, that decreasing trade barriers--as observed after the fall of the Iron Curtain--indeed stimulate outsourcing to Central and Eastern Europe and the former Soviet Union, and, second, that outsourcing to these countries significantly shifts relative employment in favour of high-skilled labour. Copyright 2003, Oxford University Press.

Cross-border Outsourcing: U.S. International Tax Pitfalls, Pratfalls, and Opportunities

During the past decade, there has been a surge in outsourcing by businesses both in the United States and abroad. In the face of this surge in outsourcing as well as the trend toward outsourcing activities that come closer and closer to a business' core, some commentators have underscored the need for businesses to make an educated decision about whether and what to outsource. This article, which, as its title indicates, is particularly concerned with cross-border outsourcing, is written in the same vein. It provides a non-exhaustive examination of the myriad of circumstances under which a decision to outsource the provision of goods or the performance of services to a foreign provider can affect the application of the U.S. international tax regime to the outsourcing business. The purpose of this article is to foster greater awareness of the sometimes dissonant tax aspects of cross-border outsourcing and thereby impel businesses and their legal advisors to take a more holistic view of the decision to outsource - a view that encompasses not only the potential business benefits and detriments of a decision to outsource, but also the potential tax benefits and detriments of such a decision.