Differentiators of Managerial Preferences for Outsourcing: Experimental Evidence of the Moderating Role of Value Appropriation

47 Pages Posted: 3 Apr 2010

See all articles by Nidthida Lin

Nidthida Lin

School of Business, University of Western Sydney

Timothy M. Devinney

University of Manchester - Alliance Manchester Business School

Tim R. Holcomb

Miami University - Farmer School of Business

Date Written: March 29, 2010

Abstract

This study adds to our understanding of outsourcing decision-making by examining the differential effect of potential cost and non-cost innovation benefits on outsourcing choices made by top managers. In addition, we show that value appropriation - which we define in this context as a firm’s ability to capture(appropriate) value created by effectively combining and leveraging the capabilities it sources through outsourcing partners - plays a moderating role on the decision to outsource, particularly when the expected benefits involve value realized from complementary internal and external capabilities. Our results reveal that although cost efficiency incentives remain an important motivation behind outsourcing, managers recognize and strongly value non-cost innovation benefits and the role of contractual efficiency when making outsourcing decisions.

Keywords: Strategic Outsourcing, Value Appropriation, Choice Experimentation, Innovation

JEL Classification: D21, L14, L22, L23, M11, M21, O30

Suggested Citation

Lin, Nidthida and Devinney, Timothy M. and Holcomb, Tim R., Differentiators of Managerial Preferences for Outsourcing: Experimental Evidence of the Moderating Role of Value Appropriation (March 29, 2010). Available at SSRN: https://ssrn.com/abstract=1579841 or http://dx.doi.org/10.2139/ssrn.1579841

Nidthida Lin

School of Business, University of Western Sydney ( email )

Locked Bag 1797
Penrith, NSW 2751
Australia

Timothy M. Devinney (Contact Author)

University of Manchester - Alliance Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Tim R. Holcomb

Miami University - Farmer School of Business ( email )

Oxford, OH 45056
United States

HOME PAGE: http://fsb.miamioh.edu/

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