Does the strategic orientation of a firm guide its degree of offshoring?

Abstract

Despite the growing importance of information technology (IT) enabled offshore sourcing, there is relatively little academic research to understand the phenomenon. In this study, conceptualizing offshore sourcing as a strategic decision, and using the path dependency theory, we present a strategic sourcing model. Next, using secondary data, we empirically test the proposed model to study the role of the 'strategic orientation', in explaining the degree of off shoring. Overall, the findings suggest that a firm's offshore decision is in tandem with its broad strategic orientation. Further, knowledge and innovation strategy emerges as the key factor explaining the degree of off shoring. Our results indicate that in contrast to the popular belief, a low-cost strategy may not necessarily be associated with off shoring decision. The paper concludes with a discussion of the implications of the results for research and practice.