Examining Managerial Preferences and Choices: The Role of Value Creation and Value Appropriation Drivers in Strategic Outsourcing

Posted: 20 Jan 2016

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

Date Written: January 19, 2016

Abstract

A significant volume of research examines value creation (total value created in a given relational transaction between two or more firms) and value appropriation (level of value the focal firm captures) as two major components in what managers consider when considering the outsourcing choice. However, scholars have paid far less attention to the trade-offs managers of a focal firm make when they consider the total value that an outsourcing choice creates and the value they expect the firm to capture. In a study of 1,728 decisions made by 72 managers with outsourcing experience, we examine how managers distribute importance (i.e., utility) among these two important value components, and whether or not heterogeneity exists in managerial preference models. Our analysis finds that managers’ expectation about the total value an outsourcing engagement will create has a positive influence on the decision to outsource. Moreover, the level of value managers expect to appropriate strengthens this relationship when the value an outsourcing engagement creates involves shared investments in resources and capabilities. We also find significant idiosyncrasy in managerial preference models. In several cases, the characteristics of the decision maker explain a large portion of the variance in the decision to outsource.

Keywords: outsourcing decision, micro-foundations, decision making, value creation and value appropriation, heterogeneity, choice experimentation

Suggested Citation

Lin, Nidthida and Devinney, Timothy M. and Holcomb, Tim R., Examining Managerial Preferences and Choices: The Role of Value Creation and Value Appropriation Drivers in Strategic Outsourcing (January 19, 2016). Available at SSRN: https://ssrn.com/abstract=2718121

Nidthida Lin (Contact Author)

School of Business, University of Western Sydney ( email )

Locked Bag 1797
Penrith, NSW 2751
Australia

Timothy M. Devinney

University of Manchester - Alliance Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Tim R. Holcomb

Miami University ( email )

Farmer School of Business
800 E. High Street, 2075 FSB / MSC1148
Oxford, OH Ohio 45056
United States
5135293665 (Phone)

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

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
329
PlumX Metrics