Is offshore sourcing decision astrategic response to declining firm performance?

Abstract

Strategic actions by firms are often triggered by emerging contingencies. In this research, using contingency theory and strategic change literature, we conceptualize offshore sourcing decision as a strategic response to declining firm performance. Further, using secondary data, we empirically test the proposed model. Overall, the findings suggest that a firm's degree of offshoring is not associated with its performance downturn. On the contrary, degree of offshoring is positively related to an increase in firm level parameters like employee productivity and international experience. The paper concludes with a discussion of the implications of the results, for research and practice.