Offshoring, Outsourcing, and Strategy in the Global Firm

Offshore outsourcing of many of the activities of the firm has become a major issue of concern in welfare economics, politics, business management, and international business scholarship. From both practical and scholarly perspectives, though, we must recognize that this is not a new phenomenon, and that neither outsourcing nor offshoring is necessarily the problem that has been represented in the popular and scholarly press (Contractor et al., 2010: Engardio, 2006). The production of goods in locations other than those in which they are sold has been an established strategy of multinational firms for decades--as has the subset of situations in which offshore locations are used to produce for home country consumption. Traditional situations such as Nike moving shoe manufacturing to Asia have become commonplace and attract little attention. However, the dramatic increase of offshore service provision since 2000 was unexpected, affects the sort of knowledge work that was to be the refuge of the developed world, and imposes international competition on firms, jobs, and markets that had been seen as exempt--and has attracted new attention. In a similar vein, we are finding that offshore outsourcing is expanding rapidly in new era sectors such as alternative energy. Even as the science and engineering of alternative energy emerge from Western university labs, companies hoping to exploit these new ideas are finding not only that overseas manufacturing is less expensive but also that only countries like China retain the capacity to manufacture such goods. Perhaps we should take a longer look at offshore outsourcing to see what it can offer us both as scholars and as business practitioners--but without the distractions of populist hysteria