Academic journal article Business Renaissance Quarterly

Moving Out: Toward Understanding the Complexity of Outsourcing in the Age of Globalization

Academic journal article Business Renaissance Quarterly

Moving Out: Toward Understanding the Complexity of Outsourcing in the Age of Globalization

Article excerpt

Abstract

The outsourcing of productive activities to foreign countries appears to be an integral part of the dynamics of economic globalization. Outsourcing is a highly complex phenomenon and, not surprisingly perhaps, has generated intense debates in the United States and elsewhere. This article seeks to make a contribution toward understanding the complexity of outsourcing as a major business activity of our times. The article evaluates the significance of offshore outsourcing as an important feature of contemporary economic globalization, and examines the overall nature of the debates surrounding this phenomenon. Finally, the concluding section of the article analyzes the implications of outsourcing for management and organizations.

Introduction

The phenomenon of outsourcing is commonly seen as a complex process of wide-ranging significance that forms an important part of the broader dynamics of currently ongoing globalization (Friedman, 2005; Jones, 2003; Prestowitz, 2005). Often enough, discussions of outsourcing and globalization tend to converge in public discourse. Indeed, there even appears to be a tendency in some circles to view globalization almost exclusively through the lens of outsourcing and, in effect, to regard outsourcing and globalization to be virtually one and the same phenomenon. Although such a view that seems to consider outsourcing and globalization to be roughly equivalent phenomena is not precisely accurate, it does point toward the importance accorded in sections of popular consciousness and discourse to the issue of outsourcing. In the interest of conceptual precision and clarity, however, it needs to be emphasized at the very outset that globalization is a process of much wider scope than outsourcing, and the two should not be seen as indistinguishable phenomena. Outsourcing is more appropriately understood as one among a range of features characterizing the broader processes of contemporary globalization. As pointed out by a number of scholars in a variety of academic disciplines, globalization is a multidimensional phenomenon encompassing a wide array of elements, including economic, cultural, technological, political, ideological, demographic, and so on (Appadurai, 1996; Parker, 1996, 2003; Pieterse, 2004; Prasad a Prasad, 2006; Sklair, 2000). Economic globalization, thus, is only one aspect, among many, of the overall phenomenon of globalization. Economic globalization, in turn, consists of a variety of somewhat overlapping processes involving growing cross-country interaction and integration in the areas of production of goods and services, international finance, and international trade (Castells, 2000; Govindarajan a Gupta, 2000; Prasad, 2006). Outsourcing may properly be seen as mostly belonging to the sphere of economic globalization and, indeed, as forming one of the key components of contemporary economic globalization. Outsourcing is a highly complex phenomenon and, as such, is at the center of intense debates and controversy. Our objective in the present article is to make a contribution toward understanding the complexity of outsourcing in the current age of globalization, and to examine the implications of this phenomenon for business and management.

In broad terms, outsourcing refers to the practice of contracting out specific organizational functions and activities (e.g., accounting, customer support, human resources, etc.) to independent external firms, rather than performing those functions in-house. In other words, outsourcing is the acquisition by one firm of certain value-creating activities by means of entering into market-based contractual arrangements with other independent firms (Doh, 2005; Gainey a Klaas, 2003). Needless to say, the independent external firms to whom specific value-creating activities might be outsourced by a company can be either domestic firms or foreign firms. For instance, a company located in the United States may outsource certain internal activities to other firms located within the geographical boundaries of the U. …

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