The Study of Relationship between Outsourcing Strategy, Orga(2)

　　In the globally networked economy, outsourcing is increasingly becoming a strategic weapon. Firms transfer non-core activities to external organizations that possess an adequate level of expert knowledge and scale economies in order to achive operational efficiency and cost reduction goals. The primary reason for the early period of outsourcing is to reduce transaction costs through the division of work between different firms(Hatonen & Eriksson,2009; Senja & Mika,2009). With the advancement of information and communication technology, the development of logistics, wide applications of process rationalization and task standardization, transaction costs have been reduced significantly. As a result, this low transaction costs environment has facilitated outsourcing and contributed to increased cost efficiency.Ever since Prahalad and Hamel’s core competence theory in 1990s, firms have regarded outsourcing, not merely as cost reduction tool, but as strategic initiatives for securing core competitiveness. With rapid changes in technology, market demand and supplier environments, it is not effective for firms to compete with the use of their internal capabilities alone. Thus, firms expand the scope of outsourcing into traditional functional cores (e.g., R & D, product design and marketing). With these expanded scope and scale of outsourcing, firms also attain multiple competitive requirements (e.g., cost reductions, innovativeness and flexibility) in the turbulent market environment.According to "Management Tools and Trends 2009" by Bain & Company (Rigby & Bilodeau,2009), the latest trend in outsourcing is clear.63% of firms in 2000 and 77% in 2006 and 2008 regard outsourcing as their strategic management weapon. On the other hand, overall levels of satisfaction with their outsourcing have stayed below 50%. Many firms adopt outsourcing practices in order to obtain cost efficiency and strategic competitiveness, yet more than half of the firms are disappointed with their outsourcing outcomes. This alarming outcome calls for critical examinations of effective outsourcing practices. Previous research explores the drivers, processes and outcomes of outsourcing, and show inconsistent results regarding the outsourcing effects. These contradictory results on outsourcing effects suggest that the contextual differences such as "the individual transaction and the contracting environment" (Leiblein, Reuer & Dalsace,2002) and the different specific strategic intents (Bengtsson, Von Haartman & Dabhilkar,2009) of outsourcing need further investigations.As the daily heated market competition goes, companies are under high pressure of cost cut-down. Thus in this"vicious" business environment, more companies have noticed the leverage effect and benefit of available external resources in cost reduction and competitive advantage acquisition, in other words, out-sourcing is increasingly becoming a strategic weapon for enterprises to achieve effectiveness enhancement and innovation capability maintanence. Nevertheless, various risks and uncertainties will run thru the whole process of outsourcing, and no satisfactory results would be guaranteed. Henceforth, proper risk control and successful outsourcing strategy implementation would come up as the kay issue for outsourcing performance improvement.Based on existing relevant researches, this study focuses on the relationship between outsourcing strategy, organinational control and outsourcing performanc, and the moderating effects of related knowledge and competence trust. This study conducted three main researches as bellows:(1) Literature review. This study reviews transaction cost theory, resource based theory.outsourcing theory and organizational control theory, which are used as a theory base for this study to indentigy reserch framwork.(2) Explorative case study and research framework. Based on literature review. this disseration implements explorative case study. The analysis of multiple cases suggests propostion and initial research concept model that outsourcing strategy influences outsourcing performance through organizational control.(3) Based on the data collected from 166 firms operating in China, This reserch tests the hypotheses that have been developed prior to this step. Statistical regression methods are applied to verify proposed hypotheses.This study has drawn basic conclusions as bellows:(1) Based on current findings, this paper would classify outsourcing into efficiency-seeking outsourcing and innovation-seeking outsourcing. Due to the various transaction environment, outsourcing motivation, characteristics and risks. outsourcing strategies would greatly impact the outsourcing performance, and the objective differences require enterprises to take different management and control mechanism. This paper will present those outsourcing motivations and characteristics in detail.(2) Outsourcing strategy with either efficiency-seeking or innovation-seeking would determine the intensity and mechanism of organizational control. This paper found that in terms of efficiency-seeking outsourcing, output control and process control is appropriate and the most functional, while social control plays a supportive role in the context of China. As for innovation-seeking outsourcing, social control is the most effective option, and proper formal control of output control and process control is a must in accordance with the outcome measurability and task programmability.(3) Related knowledge and competence trust would serve as moderator on the relationships between outsourcing strategy and process control in efficiency-seeking outsourcing. To put it specifically, outsourcer’s command of related knowledge about outsourced task would strengthen the relationship between outsourcing strategy and process control. On the contrary, competence trust toward the supplier would weaken the relationship between outsourcing strategy and process control.(4) Organizational control and outsourcing performance are positively related. The consensus achieved by existing literature regards loss of control as the main cause of outsourcing failure. This study shows that output control, process control and social control without exception all have positive impact on outsourcing performance, which means organizational control would undoubtedly promote outsourcing performance.(5) This paper provides insight for successful outsourcing implementation thru organizational control. In efficiency-seeking outsourcing, company should focus on output control and process control, while taking social control as a supplement. In innovation-seeking outsourcing, company should utilize social control fully, and absorb the auxiliary benefit of output control and process control. In other words, under the circumstances of low outcome measurability combined with high task programmability, innovation outsourcing strategy would exert key influence on social control and process control, which would loom large on outsourcing performance improvement.In summery, this research emphasizes that different outsourcing strategy demand differential organizational control mechanism to maximize outsourcing performance. With this fundamental concern, this paper has supplemented and expanded existing theory about outsourcing and organizational control. Furthermore, it would present practicable organizational control schemes for management on how to implement effective outsourcing in the context of China

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The Study of Relationship between Outsourcing Strategy, Orga(2)