The Offshoring Research Network is an international network of researchers and practitioners studying organizations in their transition to globalizing their business functions, processes and administrative services. The ORN conducts annual surveys tracking global sourcing strategies, drivers, concrete implementations and plans across all business functions and processes.
The ORN is managed by Duke University, The Fuqua School of Business, Center for International Business Education and Research (CIBER).
Offshoring, according to the ORN, refers to the process of sourcing business functions or processes supporting home-based or global operations from a foreign country, either through wholly owned organizational units (captive offshoring/shared services) or external service providers (offshore outsourcing).Manning et al. (2008) A Dynamic Perspective on Next-Generation Offshoring: The Global Sourcing of Science and Engineering Talent, Academy of Management Perspectives 22.3, p. 39.
History and current objectives
The ORN project was launched in 2004 by the Center for International Business Education and Research (CIBER) at Duke University, The Fuqua School of Business. Dr. Arie Y. Lewin, Professor of Strategy and International Business and Director of Duke CIBER, was the initiator and has been the Lead Principal Investigator of the ORN project.
The findings from the annual research surveys have shifted the focus of ORN research over time. After its initial orientation to offshoring white-collar work, the ORN project has put more emphasis on the global search for talent and offshoring of higher-skilled tasks, in particular product development. Most recently, the ORN project has positioned itself as a research project focusing on studying companies in their transition to globalizing their business functions, processes and administrative services. Offshoring is understood as an intermediary step towards evolving new global organizational capabilities rather than an end in itself.Heijmen et al. (2009) Offshoring Reaches the C-Suite 2007/8 ORN Survey Report.
Research partners
University/school Country Year joined Researchers Duke University, The Fuqua School of Business, Center for International Business Education and Research (CIBER) Prof. Arie Y. Lewin, Dr. Carine Peeters (2004–2006), Dr. Stephan Manning (2006–2009), Dr. Nidthida Perm-Ajchariyawong (Since 2008) University of Manchester, Manchester Business School Prof. Silvia Massini Copenhagen Business School, Center for Strategic Management and Globalization Prof. Torben Pedersen, Prof. Bent Petersen Rotterdam School of Management, Erasmus University Prof. Henk Volberda Solvay Brussels School of Economics and Management Prof. Carine Peeters University of Navarra, IESE Business School Prof. Joan E. Ricart WHU – Otto Beisheim School of Management Prof. Thomas Hutzschenreuter University of Newcastle (Australia), Newcastle Business School; University of Western Sydney, Centre for Industry and Innovation Studies Prof. Stephen Chen; Prof. Oscar Hauptman EMLYON Business School Prof. Christiane Prange Kyung Hee University Prof. Geon-Cheol Shin University of Tokyo Prof. Takahiro Fujimoto, Prof. Youngwon Park
Sponsoring partners
Organization Sponsored activities Years Archstone Consulting LLP Corporate Client Survey Booz Allen Hamilton/Booz & Co. Corporate Client Survey (2006), Service Provider Survey (2007) The Conference Board U.S. Corporate Client Survey PricewaterhouseCoopers Founding Member of the ORN Best Practices Institute and European Corporate Client Survey International Association of Outsourcing Professionals (IAOP) Service Provider Survey, Academic Conference Enterprise Software Roundtable Service Provider Survey Software Information and Industry Association Service Provider Survey NASSCOM, 6th Sense, Genpact, ITAA, Quickstart Global, Sonnenschein Nath & Rosenthal Service Provider Survey University CIBERs 1 Academic conferences and associated activities Great IdeaGreat Idea Service Provider Survey Wipro 3rd Annual International Research Conference on Offshoring
1 Florida International University, Indiana University, Michigan State University, Temple University, University of Connecticut, University of Hawaii at Manoa, University of Kansas, University of Maryland, College Park, University of Memphis, University of North Carolina at Chapel Hill
Global search for talent
A key ORN finding is the increasing importance of access to qualified personnel as a driver of offshoring decisions. Most scholars have argued that offshoring is primarily driven by opportunities to reduce labor costs and by labor arbitrage effects.See e.g. Blinder, A. S. (2006). Offshoring: The next industrial revolution? Foreign Affairs, 85(2), p. 113–128; Levy, D.M. (2005). Offshoring in the new global political economy. Journal of Management Studies, 42 (3), p. 685-693.
While the ORN surveys confirm the importance of costs, they also reveal that companies use offshoring as a means to access talent pools outside their home countries, in particular for higher-skilled work. This trend has been explained by an increasing supply of science and engineering talent in emerging economies, e.g., India, and the increasing difficulty of finding talent in the U.S. and Western Europe.Manning et al. (2008) A Dynamic Perspective on Next-Generation Offshoring: The Global Sourcing of Science and Engineering Talent, Academy of Management Perspectives 22.3, p.35-54.
It is further reinforced by restrictive visa policies in the U.S. and incentives for foreign graduates to return to their home countries, a recent phenomenon referred to as brain circulation.Saxenian, AL (2005) From Brain Drain to Brain Circulation: Transnational Communities and Regional Upgrading in India and China. Studies in Comparative International Development, 40.2, p. 35-61; OECD (2008) The Global Competition for Talent: Mobility of the Highly Skilled. Paris.
Whether offshoring is primarily driven by costs, by the global search for talent or a combination of both has been widely debated. Some scholars argue that science and engineering degrees in India and other emerging economies are, on average, not yet compatible with degrees in the U.S. and Western Europe. Therefore, the supply of qualified talent in emerging economies is more limited than often argued in the business press.Gereffi, G. et al. (2008) Getting the Numbers Right: International Engineering Education in the United States, China, and India. Journal of Engineering Education, Vol. 97.1, p. 13-25.; Farrell, D. et al. (2006) Sizing the Emerging Global Labor Market: Rational Behavior from Both Companies and Countries Can Help It Work More Efficiently. Academy of Management Perspectives 20.4, p.23-34.
Some Asian companies, for example, have recently hired a number of Western managers.
However, foreign client firms sometimes respond to that challenge by setting up complex collaborations with local universities to secure access to qualified personnel.
Also, recent studies suggest a trend towards modularization and standardization of higher-skilled work allowing for the use of less qualified personnel for lower costs. According to ORN studies, the search for talent and cost considerations therefore depend on changes in technology, education policies, firm capabilities and economic conditions.Manning et al. (2008) A Dynamic Perspective on Next-Generation Offshoring: The Global Sourcing of Science and Engineering Talent Academy of Management Perspectives 22.3, p.35-54.
Globalization of innovation
The ORN surveys reveal that more and more firms are offshoring knowledge work, including software development, engineering, product design, research and development. Previously, offshoring was mainly associated with Information Technology Outsourcing and standard business processes.Lewin, A.Y., Peeters, C. (2006) Offshoring Work: Business Hype or the Onset of Fundamental Transformation? Long Range Planning, Vol 39.3, p. 221-239.
This trend is increasingly being discussed in the academic and practitioner-oriented literature. The economist Alan Blinder argues that technical processes, such as software testing and engineering support, are becoming easy to offshore because advanced information technology helps decompose and separate technical processes which can then be undertaken and coordinated remotely.See e.g. Blinder, A. S. (2006). Offshoring: The next industrial revolution? Foreign Affairs, 85(2), p. 113–128
Other researchers argue that knowledge-intensive tasks remain difficult to decompose because of the complex and often tacit knowledge involved in carrying out these tasks.Brusoni, S. (2005) The Limits to Specialization: Problem Solving and Coordination in 'Modular Networks' Organization Studies 26(12), p. 1885-1907.
Geographic knowledge services clusters
One major factor contributing to recent offshoring and outsourcing trends is the emergence of new geographic knowledge services clusters. In general, business clusters can be defined as geographic concentrations of firms and institutions related to particular industries or fields.Porter, M. (2000) Location, Competition, and Economic Development: Local Clusters in a Global Economy. Economic Development Quarterly, Vol. 14(1), p. 15-34.
In the offshoring space, a new type of cluster is emerging, quite different from [Silicon Valley], which often serves as a prototype of an industry cluster.Bresnahan, T. et al. (2001) 'Old Economy' Inputs for 'New Economy' Outcomes: Cluster Formation in the New Silicon Valleys. Industrial and Corporate Change, 10(4), 835-860.
These new types of clusters are highly dependent on foreign investment and are characterized by the supply of specialized talent and expertise that is demanded across industries. One key example of such a cluster is Bangalore for IT-related services and software programmers who have developed specialized service capabilities, which are in demand worldwide in several different industries, including manufacturing, financial and professional services.See also Athreye, S.S. (2005) The Indian software industry and its evolving service capability. Industrial and Corporate Change, 14(3), p. 393-418.
Recent studies further indicate that these clusters increasingly show similar institutional features across the world, such as collaborative agreements between foreign firms and local universities, which are a result of local embedding and sourcing strategies of multinational enterprises across locations.
The ORN research team has started to conduct survey- and case study-based research to better understand the development of these clusters. A very recent project, for example, seeks to investigate the emergence of new IT and software development clusters in Latin America which attract foreign investors from Spain and the U.S. in particular.Manning, S.; Ricart J.-E.; Rosatti Rique, M.S.; Lewin, A.Y. (2010) From Blind Spots to Hotspots: How Knowledge Services Clusters Develop and Attract Foreign Investment. Journal of International Management, 16(4), p. 369-382.
A longer-term project involves the identification of knowledge service clusters around the world, using a longitudinal study of location choices and the delivery of offshore services from particular locations. Other scholars have also looked into the emergence of offshore destinations, in particular in India, and the factors contributing to the selection of locations by investors.See e.g. Dossani, R.; Kenney, M. (2007) The next wave of globalization: relocating service provision to India. World Development, 35(5), p. 772-791.; Doh, J.P. et al. (2009) Separable But Not Equal: The Location Determinants of Discrete Offshoring Activities. Journal of International Business Studies (Forthcoming).
New global organizational capabilities