Academic journal article Management Revue

Strategic Outsourcing in the German Engine Building Industry. an Empirical Study Based on the Resource Dependence Approach**

Academic journal article Management Revue

Strategic Outsourcing in the German Engine Building Industry. an Empirical Study Based on the Resource Dependence Approach**

Article excerpt

Outsourcing is an organizational measure that changes the resource dependencies of a company. In this paper, a framework is developed from the perspective of the resource dependence approach to explain strategic outsourcing in the German engine building industry. On the basis of the NIFA panel, which describes the development of this industry in the 1990s, the framework is examined in cross-sectional and longitudinal studies. It can be shown that the resource dependence perspective contributes to an explanation of organizational changes, both outsourcing and insourcing. In addition, the longitudinal studies show the significance of the strategic, that is, long-term orientation of the ensemble of organizational measures towards company success.

Key words: Outsourcing, engine building industry, resource dependence approach, panel study

1. Introduction

Outsourcing, on the one hand, is considered as a central element of organization on the way towards modern, that is, "streamlined" organization (Drucker 1988). In Germany, this instrument was quickly adopted, beginning with the familiar cases of the outsourcing of computer services at General Motors and Eastman Kodak at the end of the 1980s (Szyperki 1993). At first, outsourcing was only applied to the realm of information technology, closely adhering to the practical models. But in both practical use and the theoretical discussion of the phenomenon outsourcing, this measure was soon applied to other corporate functions as well (Trossmann 2002). Since then, outsourcing has been considered a central component in the "paradigm of the new decentralization" (Drumm 1996). In normative terms, outsourcing was particularly suggested in industries like the German engine building industry, which exhibit a high degree of vertical integration (Widmaier 2000b).

On the other hand, the problem of organizing business processes effectively and mobilizing them strategically through layers of value creation is an essential question of business economics theory. Accordingly, outsourcing was equated with the more fundamental "make or buy" decision (Walker/Weber 1984). The discussion of whether services are most advantageously provided within a business or by others through the market is often held with a one-sided emphasis on outsourcing. This onesidedness corresponds with the recent orientation of business organizational theory solely according to economic theory. Both the new economics of institutions, in particular the transaction costs approach, as well as the "resource based view of the firm" are now being discussed in Germany in connection to outsourcing in practical application with a recommendation towards the market (Matiaske/Mellewigt 2002). On a theoretical level, a framework needs to be established that considers insourcing as well as outsourcing as organizational options. Empirically speaking, it is advantageous to consider outsourcing or insourcing in the course of time as an organizational option.

This study explores the determinants, motifs, and success of insourcing and outsourcing in the German engine building industry. In contrast to the mainstream of German research, the focus here will not be placed on taking stock of these measures, but on examining the frame of reference for explaining the phenomenon, following the resource dependence perspective and linking Pfeffer/Salancik's (1978) classical argument with the concept of strategy. Empirically, the study is based on panel data regarding organization in the German engine building industry, the so-called NIFA panel (Widmaier 2000a).

In section two, I will sketch out the framework for explaining outsourcing. The third section presents the German engine building industry and explains the situation of the industry on the base of the NIFA panel. Section four presents central hypotheses that will be tested in the empirical part. In the fifth part, I will present the data basis and descriptive statistics, as well as cross sectional and longitudinal models on the determinants and consequences of outsourcing. …

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