Dividing Global Business Process: Safeguarding Confidential Data
Article Sidebar
Business Strategy,
Fragmentation,
Misappropriation,
Communication Technology
Main Article Content
Abstract
This study shows that manufacturing unit process dispersion serves as an operational-level variable that allows businesses to modify their information protection strategy when it comes to sourcing business services overseas to suit the regulatory framework of the chosen host nation as well as the potential for using internal controls over activities carried out overseas. Our hypothesis is that businesses are more inclined to split up their processes among several foreign production facilities rather of concentrating every procedure duties in one unit when the aforementioned mechanisms are unavailable. Businesses may take advantage of the synergies between the scattered pieces of a process while lowering the risk of individual fragment theft because of IT-enabled integration capabilities. Robustness tests and empirical findings closely align with these theories. Additionally, we discover that the likelihood of using the defense mechanism against process fragmentation increases with the firm's expertise in the host nation as well as the alternative worth of the activity's unique knowledge that is outsourced.
Article Details
References
Abadie, A., & Imbens, G. W. 2006. Large sample properties of matching estimators for average treatment effects. Econome trica, 74(1): 235–267.
Aguilera, R. 2011. Interorganizational governance and global strategy. Global Strategy Journal, 1(1): 90–95.
Alcácer, J., & Chung, W. 2002. Knowledge seeking and location choice of foreign direct investment in the United States. Management Science, 48(12): 1534–1554.
Alcácer, J., & Delgado, M. forthcoming. Spatial organization of firms and location choices through the value chain. Manage ment Science.
Amara, N., Landry, R., & Traoré, N. 2008. Managing the protec tion of innovations in knowledge-intensive business services. Research Policy, 37(9): 1530–1547.
Amiti, M., & Wei, S.J. 2009. Service offshoring and productivity: Evidence from the US. World Economy, 32(2): 203–220.
Anand, J., Mulotte, L., & Ren, C. R. 2015. Does experience imply learning? Strategic Management Journal, advance online pub lication 16 July. doi:10.1002/smj.2401.
Arellano, M. 1987. Computing robust standard errors for within group estimators. Oxford Bulletin of Economics and Statistics, 49(4): 431–434.
Argyres, N. 1999. The impact of information technology on coordination: Evidence from the B-2 “Stealth” bomber. Orga nization Science, 10(2): 162–180.
Arora, A., & Ceccagnoli, M. 2006. Patent protection, comple mentary assets, and firms’ incentives for technology licensing. Management Science, 52(2): 293–308.
Arundel, A. 2001. The relative effectiveness of patents and secrecy for appropriation. Research Policy, 30(4): 611–624.
Baldwin, C. Y., & Henkel, J. 2015. Modularity and intellectual property protection. Strategic Management Journal, 36(11): 1637–1655.
Barkema, H. G., & Vermeulen, F. 1998. International expansion through start-up or acquisition: A learning perspective. Acad emy of Management Journal, 41(1): 7–26.
Benito, G. R., Dovgan, O., Petersen, B., & Welch, L. S. 2013. Offshore outsourcing: A dynamic, operation mode perspective. Industrial Marketing Management, 42(2): 211–222.
Bertrand, O., & Mol, M. J. 2013. The antecedents and innovation effects of domestic and offshore R&D outsourcing: The con tingent impact of cognitive distance and absorptive capacity. Strategic Management Journal, 34(6): 751–760.
Beugelsdijk, S., Pedersen, T., & Petersen, B. 2009. Is there a trend towards global value chain specialization? An examination of cross border sales of US foreign affiliates. Journal of International Management, 14(3): 126–141.
Boeh, K. K., & Beamish, P. W. 2012. Travel time and the liability of distance in foreign direct investment: Location choice and entry mode. Journal of International Business Studies, 43(5): 525–535.
Bowen, H. P. 2012. Testing moderating hypotheses in limited dependent variable and other nonlinear models secondary versus total interactions. Journal of Management, 38(3): 860–889.
Branstetter, L. G., Fisman, R., & Foley, C. F. 2006. Do stronger intellectual property rights increase international technology transfer? Empirical evidence from US firm-level panel data. Quarterly Journal of Economics, 121(1): 321–349.
Brusoni, S., & Prencipe, A. 2001. Unpacking the black box of modularity: Technologies, products and organizations. Indus trial and Corporate Change, 10(1): 179–205.
Brusoni, S., Prencipe, A., & Pavitt, K. L. R. 2001. Knowledge specialization and the boundaries of the firm: Why do firms know more than they make? Administrative Science Quarterly, 46(4): 597–621.
Buckley, P. J. 2009. Internalisation thinking: From the multina tional enterprise to the global factory. International Business Review, 18(3): 224–235.
Buckley, P. J., & Casson, M. 1976. The future of the multinational enterprise. London: Palgrave Macmillan.
Buckley, P. J., & Ghauri, P. N. 2004. Globalisation, economic geography and the strategy of multinational enterprises. Jour nal of International Business Studies, 35(2): 81–98.
Buckley, P. J., & Strange, R. 2011. The governance of the multinational enterprise: Insights from internalization theory. Journal of Management Studies, 48(2): 460–470.
Caliendo, M., & Kopeinig, S. 2008. Some practical guidance for the implementation of propensity score matching. Journal of Economic Surveys, 22(1): 31–72.
Cantwell, J. A. 2015. An introduction to the eclectic paradigm as a meta-framework for the cross-disciplinary analysis of interna tional business. In J. A. Cantwell (Ed.), The eclectic paradigm: A framework for synthesizing and comparing theories of interna tional business from different disciplines or perspectives: 1–22. London: Palgrave Macmillan.
Cantwell, J. A., & Mudambi, R. 2005. MNE competence-creating subsidiary mandates. Strategic Management Journal, 26(12): 1109–1128.
Ceci, F., & Prencipe, A. 2013. Does distance hinder coordination? Identifying and bridging boundaries of offshored work. Journal of International Management, 19(4): 324–332.
Cohen, W. M., Nelson, R. R., & Walsh, J. P. 2000. Protecting their intellectual assets: Appropriability conditions and why US manu facturing firms patent (or not). NBER Working Paper No. 7552, National Bureau of Economic Research, Cambridge, USA.
Contractor, F. J., Kumar, V., Kundu, S., & Pedersen, T. 2010. Reconceptualizing the firm in a world of outsourcing and offshoring: The organizational and geographical relocation of high-value company functions. Journal of Management Studies, 47(8): 1417–1433.
Contractor, F. J., Kumar, V., Kundu, S., & Pedersen, T. (Eds) 2011. Global outsourcing and offshoring– In search of the optimal configuration for a company. In, Global outsourcing and off shoring 3–47. Cambridge: Cambridge University Press.
Coucke, K., & Sleuwaegen, L. 2008. Offshoring as a survival strategy: Evidence from manufacturing firms in Belgium. Jour nal of International Business Studies, 39(8): 1261–1277.
Davenport, T. H., & Short, J. E. 1990. The new industrial engineering: Information technology and business process redesign. MIT Sloan Management Review, 31(4): 11–27.
Delios, A., & Henisz, W. J. 2000. Japanese firms’ investment strategies in emerging economies. Academy of Management Journal, 43(3): 305–323.
Delios, A., & Henisz, W. J. 2003. Political hazards, experience and sequential entry strategies: The international expansion of Japanese firms, 1980–1998. Strategic Management Journal, 24(11): 1153–1164.
Doh, J., Bunyaratavej, K., & Hahn, E. 2009. Separable but not equal: The location determinants of discrete services offshoring activities. Journal of International Business Studies, 40(6): 926–943.
Dunning, J. H. 1998. Location and the multinational enterprise: A neglected factor? Journal of International Business Studies, 29(1): 45–66.
Forman, C., Goldfarb, A., & Greenstein, S. 2005. How did location affect adoption of the commercial internet? Global village vs. urban leadership. Journal of Urban Economics,58(3):389–420.
Foss, N. J., & Pedersen, T. 2004. Organizing knowledge processes in the multinational corporation: An introduction. Journal of International Business Studies, 35(5): 340–349.
Freeman, C., & Louçà, F. 2001. As time goes by: From the industrial revolutions to the information revolution. New York: Oxford University Press. Gadrey, J., & Gallouj, F. 1998. The provider-customer interface in business and professional services. Service Industries Journal, 18(2): 1–15.
Gallouj, F., & Weinstein, O. 1997. Innovation in services. Research Policy, 26(4): 537–556. Gao, G. Y., & Pan, Y. 2010. The pace of MNEs’sequential entries: Cumulative entry experience and the dynamic process. Journal of International Business Studies, 41(9): 1572–1580.
Gereffi, G. 1999. International trade and industrial upgrading in the apparel commodity chain. Journal of International Economics, 48(1): 37–70.
Gereffi, G., Humphrey, J., & Sturgeon, T. 2005. The governance of global value chains. Review of International Political Economy, 12(1): 78–104.
Ghoshal, S., & Bartlett, C. A. 1990. The multinational corporation as an interorganizational network. Academy of Management Review, 15(4): 603–626.
Gilley, K. M., & Rasheed, A. 2000. Making more by doing less: An analysis of outsourcing and its effects on firm performance. Journal of Management, 26(4): 763–790.
Ginarte, J. C., & Park, W. G. 1997. Determinants of patent rights: A cross-national study. Research Policy, 26(3): 283–301.
Gooris, J., & Peeters, C. 2014. Home–host country distance in offshore governance choices. Journal of International Manage ment, 20(1): 73–86.
Gray, J., Siemsen, E., & Vasudeva, G. 2015. Collocation still matters: Conformance quality and the interdependence of R&D and manufacturing in the pharmaceutical industry. Management Science, 61(11): 2760–2781.
Greene, W. 2010. Testing hypotheses about interaction terms in nonlinear models. Economics Letters, 107(2): 291–296.
Gulati, R., & Singh, H. 1998. The architecture of cooperation: Managing coordination costs and appropriation concerns in strategic alliances. Administrative Science Quarterly, 43(4): 781–814.
Henderson, R. M. 1992. Technological change and the manage ment of architectural knowledge. In T. S. Kochan, & M. Useem (Eds), Transforming organizations: 119–131. Oxford: Oxford University Press.
Hennart, J. F. 1982. A theory of multinational enterprise. Ann Arbor: University of Michigan Press.
Hennart, J. F. 2009. Down with MNE-centric theories! Market entry and expansion as the bundling of MNE and local assets. Journal of International Business Studies, 40(9): 1432–1454.
Hennart, J. F., & Slangen, A. H. 2014. Yes, we really do need more entry mode studies! A commentary on Shaver. Journal of International Business Studies, 46(1): 114–122.
Hijzen, A., Inui, T., & Todo, Y. 2010. Does offshoring pay? Firm level evidence from Japan. Economic Inquiry, 48(4): 880–895. Holcomb, T. R., & Hitt, M. A. 2007. Toward a model of strategic outsourcing. Journal of Operations Management, 25(2): 464–481.
Hoskisson, R. E., Eden, L., Lau, C. M., & Wright, M. 2000. Strategy in emerging economies. Academy of Management Journal, 43(3): 249–267.
Howells, J. R. 1995. Going global: The use of ICT networks in research and development. Research Policy, 24(2): 169–184.
Hutzschenreuter, T., Lewin, A., & Dresel, S. 2011. Gover nance modes for offshoring activities: A comparison of the US and German firms. International Business Review, 20(3): 291–313.
Hutzschenreuter, T., & Voll, J. C. 2008. Performance effects of “added cultural distance” in the path of international expan sion: The case of German multinational enterprises. Journal of International Business Studies, 39(1): 53–70. International Intellectual Property Alliance. 2013. Special 301 recommendations, http://www.iipa.com/2013_SPEC301_ TOC.htm, accessed 18 March 2013.
Jacobides, M. G., & Winter, S. G. 2005. The co-evolution of capabilities and transaction costs: Explaining the institutional structure of production. Strategic Management Journal, 26(5): 395–413.
Jandhyala, S. 2013. Property rights and international investment in information technology services. Strategic Management Jour nal, 34(7): 877–889.
Javorcik, S. 2004. The composition of foreign direct investment and protection of intellectual property rights: Evidence from transition economies. European Economic Review, 48(1): 39–62.
Jensen, P. D. Ø. 2009. A learning perspective on the offshoring of advanced services. Journal of International Management, 15(2): 181–193.
Jensen, P. D. Ø., Larsen, M., & Pedersen, T. 2013. The organiza tional design of offshoring: Taking stock and moving forward. Journal of International Management, 19(4): 315–323.
Jensen, P. D. Ø., & Pedersen, T. 2011. The economic geography of offshoring: The fit between activities and local context. Journal of Management Studies, 48(2): 352–372.
Jensen, P. D. Ø., & Petersen, B. 2013. Global sourcing of services: Risk, process, and collaborative architecture. Global Strategy Journal, 3(1): 67–87.
Johanson, J., & Vahlne, J. E. 1977. The internationalization process of the firm-a model of knowledge development and increasing foreign market commitments. Journal of International Business Studies, 8(1): 23–32.
Kaplan, S., & Garrick, B. J. 1981. On the quantitative definition of risk. Risk Analysis, 1(1): 11–27.
Kapler, J. K., & Puhala, K. A. 2011. Outsourcing,fragmentation, and integration– The pharmaceutical industry. In F. J. Contractor, V. Kumar, S. K. Kundu, & T. Pedersen (Eds), Global outsourcing and offshoring 137–167. Cambridge: Cambridge University Press.
Kaufmann, D., Kraay, A., & Mastruzzi, M. 2010. The worldwide governance indicators: A summary of methodology, data and analytical issues. World Bank Policy Research Working Paper series, No. 5430, World Bank, Washington, USA.
Kedia, B. L., & Mukherjee, D. 2009. Understanding offshoring: A research framework based on disintegration, location and externalization advantages. Journal of World Business, 44(3): 250–261.
Kumar, K., van Fenema, P., & von Glinow, M.A. 2009. Offshoring and the global distribution of work: Implications for task interdependence theory and practice. Journal of International Business Studies, 40(4): 642–667.
Langlois, R. N. 2003. The vanishing hand: The changing dynamics of industrial capitalism. Industrial and Corporate Change, 12(2): 351–385.
Larsen, M. M., Manning, S., & Pedersen, T. 2013. Uncovering the hidden costs of offshoring: The interplay of complexity, organizational design, and experience. Strategic Management Journal, 34(5): 533–552.
Larsson, R., & Bowen, D. E. 1989. Organization and customer: Managing design and coordination in services. Academy of Management Review, 14(2): 213–233.
Lee, J. Y., & Mansfield, E. 1996. Intellectual property protection and US foreign direct investment. The Review of Economics and Statistics, 78(2): 181–186.
Levina, N., & Su, N. 2008. Global multisourcing strategy: The emergence of a supplier portfolio in services offshoring. Deci sion Sciences, 39(3): 541–570.
Lewin, A. Y., Massini, S., & Peeters, C. 2009. Why are companies offshoring innovation? The emerging global race for talent. Journal of International Business Studies, 40(6): 901–925.
Lewin, A. Y., & Peeters, C. 2006. Offshoring work: Business hype or the onset of fundamental transformation? Long Range Plan ning, 39(3): 221–239.
Liu, R., Feils, D. J., & Scholnick, B. 2011. Why are different services outsourced to different countries? Journal of International Busi ness Studies, 42(4): 558–571.
Løwendahl, B. R., Revang, Ø., & Fosstenløkken, S. M. 2001. Knowledge and value creation in professional service firms: A framework for analysis. Human Relations, 54(7): 911–931.
Luo, Y. 2005. Transactional characteristics, institutional environment and joint venture contracts. Journal of International Business Studies, 36(2): 209–230. Manning, S. 2013. New Silicon Valleys or a new species? Commoditization of knowledge work andtherise of knowledge services clusters. Research Policy, 42(2): 379–390.
Manning, S., Larsen, M., & Bharati, P. 2015. Global delivery models: The role of talent, speed and time zones in the global outsourcing industry. Journal of International Business Studies, 46(7): 850–877.
Manning, S., Lewin, A. Y., & Schuerch, M. 2011. The stability of offshore outsourcing relationships. Management International Review, 51(3): 381–406.
Manning, S., Massini, S., & Lewin, A. Y. 2008. A dynamic perspective on next-generation offshoring: The global sourcing of science and engineering talent. The Academy of Management Perspectives, 22(3): 35–54.
Mariotti, S., Piscitello, L., & Elia, S. 2010. Spatial agglomeration of multinational enterprises: The role of information externalities and knowledge spillovers. Journal of Economic Geography, 10(4): 519–538.
Markus, M. L., Sia, S. K., & Soh, C. 2012. MNEs and information management: Structuring and governing it resources in the global enterprise. Journal of Global Information Management, 20(1): 1–17.
Martinez-Noya, A., & Garcia-Canal, E. 2011. Blurring firm R&D boundaries– Integrating transaction costs and knowledge based perspectives. In F. J. Contractor, V. Kumar, S. K. Kundu, &T.Pedersen (Eds), Global outsourcing and offshoring 107–136. Cambridge: Cambridge University Press.
Martinez-Noya, A., Garcia-Canal, E., & Guillen, M. F. 2012. International R&D service outsourcing by technology-intensive firms: Whether and where? Journal of International Manage ment, 18(1): 18–37.
Meyer, K. E. 2001. Institutions, transaction costs, and entry mode choice in Eastern Europe. Journal of International Business Studies, 32(2): 357–367.
Meyer, K. E., Wright, M., & Pruthi, S. 2009. Managing knowledge in foreign entry strategies: A resource-based analysis. Strategic Management Journal, 30(5): 557–574.
Miles, I., Andersen, B., Boden, M., & Howells, J. 2000. Service production and intellectual property. International Journal of Technology Management, 20(1): 95–115. Mol, M. J. 2005. Does being R&D intensive still discourage outsourcing? Evidence from Dutch manufacturing. Research Policy, 34(4): 571–582.
Mudambi, R. 2008. Location, control and innovation in knowl edge-intensive industries. Journal of Economic Geography, 8(5): 699–725.
Mudambi, R., & Venzin, M. 2010. The strategic nexus of off shoring and outsourcing decisions. Journal of Management Studies, 47(8): 1510–1533.
Narula, R., & Zanfei, A. 2005. Globalization of innovation: The role of multinational enterprises. In J. Fagerberg, D. Mowery, & R. Nelson (Eds), The Oxford handbook of innovation 318–345. Oxford: Oxford University Press.
Neter, J., Wasserman, W., & Kutner, M. 1983. Applied linear regression models. Homewood, IL: Richard D. Erwin.
Nieto, M. J., & Rodríguez, A. 2011. Offshoring of R&D: Looking abroad to improve innovation performance. Journal of International Business Studies, 42(3): 345–361. North, D. C. 1990. Institutions, institutional change, and economic performance. Cambridge: Cambridge University Press.
Norton, E., Wang, H., & Ai, C. 2004. Computing interaction effects and standard errors in logit and probit models. Stata Journal, 4(2): 154–167.
Oxley, J. E. 1999. Institutional environment and the mechanisms of governance: The impact of intellectual property protection on the structure of inter-firm alliances. Journal of Economic Behavior and Organization, 24(3): 283–310.
Oxley, J. E., & Sampson, R. C. 2004.The scope and governance of international R&D alliances. Strategic Management Journal, 25(8–9): 723–749. Park, W. G. 2008. International patent protection: 1960–2005. Research Policy, 37(4): 761–766.
Pauleen, D. J., & Yoong, P. 2001. Relationship building and the use of ICT in boundary-crossing virtual teams: A facili tator’s perspective. Journal of Information Technology, 16(4): 205–220.
Peeters, C., Dehon, C., & Garcia-Prieto, P. 2015. The attention stimulus of cultural differences in global services sourcing. Journal of International Business Studies, 46(2): 241–251.
Perkins, S.E. 2014. When does prior experience pay? Institutional experience and the multinational corporation. Administrative Science Quarterly, 59(1): 145–181.
Piscitello, L. 2011. Strategy, location, and the conceptual metamorphosis of the MNE. Global Strategy Journal, 1(1–2): 127–131.
Quinn, J. B. 2000. Outsourcing innovation: The new engine of growth. Sloan Management Review, 41(4): 13–28. Rangan, S., & Sengul, M. 2009. Information technology and transnational integration: Theory and evidence on the evolution of the modern multinational enterprise. Journal of International Business Studies, 40(9): 1496–1514.
Reeb, D., Sakakibara, M., & Mahmood, I. P. 2012. From the editors: Endogeneity in international business research. Journal of International Business Studies, 43(3): 211–218.
Roberts, J. 2000. From know-how to show-how? Questioning the role of information and communication technologies in knowledge transfer. Technology Analysis & Strategic Management, 12(4): 429–443.
Roberts, M., & Whited, T. 2011. Endogeneity in empirical corporate finance. Simon School Working Paper No. FR 11-29, University of Rochester, Rochester, USA.
Rogers, W. 1994. Regression standard errors in clustered samples. Stata Technical Bulletin, 3(13): 19–23. Roth, A. V., & Menor, L. J. 2003. Insights into service operations management: A research agenda. Production and Operations Management, 12(2): 145–164.
Rugman, A. M. 1981. Inside the multinationals: The economics of internal markets. New York: Columbia University Press.
Sartor, M. A., & Beamish, P. W. 2014. Offshoring innovation to emerging markets: Organizational control and informal institutional distance. Journal of International Business Studies, 45(9): 1072–1095.
Stringfellow, A., Teagarden, M., & Nie, W. 2008. Invisible costs in offshoring services work. Journal of Operations Management, 26(2): 164–179.
UNCTAD. 2004. World investment report: The shift towards ser vices. Geneva: UNCTAD.
van Pottelsberghe de la Potterie, B., & Lichtenberg, F. 2001. Does foreign direct investment transfer technology across borders? Review of Economics and Statistics, 83(3): 490–497.
Williamson, O. E. 1975. Markets and hierarchies: Analysis and anti trust implications. New York: Free Press.
Williamson, O. E. 1991. Comparative economic organization: The analysis of discrete structural alternatives. Administrative Science Quarterly, 36(2): 269–296.
Yamin, M., & Sinkovics, R.R. 2007. ICT and MNE reorganization: The paradox of control. Critical Perspectives on International Business, 3(4): 322–336.
Zaheer, S., Lamin, A., & Subramani, M. 2009. Cluster capabilities or ethnic ties? Location choice by foreign and domestic entrants in the services offshoring industry in India. Journal of International Business Studies, 40(6): 944–968.
Zenger, T. R., & Hesterly, W. S. 1997. The disaggregation of corporations: Selective intervention, high-powered incen tives, and molecular units. Organization Science, 8(3): 209–222.
Zhao, M. 2006. Conducting R&D in countries with weak intellec tual property rights protection. Management Science, 52(8): 1185–1199.