Flexibility as firm value driver: Evidence from offshore outsourcing

Choi, Jongmoo J.; Ju, Ming; Kotabe, Masaaki; Trigeorgis, Lenos; Zhang, Xiaotian T.

Abstract

This article tests real options theory predictions that uncertainty and flexibility are key value drivers for offshore outsourcing moderated by switching costs. Examining firm-specific and market data for outsourcing cases by U.S. firms, we find that the impact of market and environmental uncertainty and flexibility on outsourcing value is net positive and that it is greater for offshore than for domestic outsourcing. Outsourcing benefits are related to flexibility arising from growth options and moderated by switching costs underlying outsourcing activities, including loss of innovative capability and economic, institutional, and cross-country cultural differences.

Citation

Choi, J. J., Ju, M., Kotabe, M., Trigeorgis, L., & Zhang, X. T. (2018). Flexibility as firm value driver: Evidence from offshore outsourcing. Global Strategy Journal, 8(2), 351-376. https://doi.org/10.1002/gsj.1181

• Journal Article Type: Article
• Acceptance Date: Aug 26, 2017
• Online Publication Date: Sep 5, 2017
• Publication Date: 2018-05
• Deposit Date: Feb 14, 2023
• Journal: Global Strategy Journal
• Publisher: Wiley
• Volume: 8
• Issue: 2
• Pages: 351-376
• DOI: https://doi.org/10.1002/gsj.1181
• Public URL: https://durham-repository.worktribe.com/output/1181063