Abstract
Outsourcing activities to international third parties is a way to implement international development strategies. More specifically, it is a way to implement internationalization strategies for expansion when outsourcing is done in markets culturally close to the domestic ones, and for diversification when outsourcing is carried out on markets distant from the domestic ones. However, outsourcing is not always a first best choice, and more and more firms are revising their strategies and deciding for back- or re-shoring. This chapter discusses the factors firms should take into account in their outsourcing decision, and highlights the main risks connected to this choice.
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Notes
- 1.
In crowdsourcing, the performance of activities in the value chain (design, solving technical questions, building a new product or carrying out a new service, etc.) is sourced to the outside, to the “crowd” of virtual communities present on the web. Some sites also have the purpose of placing companies and professionals in contact with one another.
- 2.
From the empirical verifications done on the issue of outsourcing, it emerged that a determinant factor was the size of the companies: in small enterprises, even elementary activities are outsourced, such as bookkeeping assistance or typing (Calvelli 1990). Empirical research (Tassinari and Vaglio 1989) has also highlighted that, in the presence of a stronger learning content more easily accessible to specialized companies, the degree of transfer outside of them is accentuated; to the contrary, the uncertainties related to the costs and the final specifications induce companies to insource activities marked by greater unpredictability in terms of results and their effectiveness. In a perspective of organizational change and with regard to the services in support of the business activities, some studies (Mussati 1986) have found that companies generally show a trend to insource services requiring complex contractual forms and excessively high flexibility in the delivery processes.
- 3.
Example of international spin-off concerning DMC (Italy). DMC was born via a spin-off from FAG Italia, a licencee of the German multinational group FAG Kugelfischer, which operates in the rolling bearing sector. FAG has outsourced the distribution activity to former employees and selected dealers, for whom it establishes an annual sales budget. The parent company has thus reduced the production structure and distribution system, reducing its direct commitment to commercialization (Calvelli 1998).
- 4.
These cases of spin-offs are also called “win–win spin offs” (Bussolo et al. 1993), which is to say spin-offs that yield benefits for both sides. For the authors, this type of new entrepreneurialism should be more widespread since, according to the results of the interviews held with companies with more than 10,000 employees, the number of potential entrepreneurs would be about 5–10% of employees; the percentage is greater in smaller-sized companies.
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Calvelli, A., Cannavale, C. (2019). Outsourcing and Reshoring. In: Internationalizing Firms. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-91551-7_4
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DOI: https://doi.org/10.1007/978-3-319-91551-7_4
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