Academic journal article Journal of Competitiveness Studies

Offshoring Sectors: A Critical Comparison of Mexican Maquiladora Plants with Indian Outsourcing Offices

Academic journal article Journal of Competitiveness Studies

Offshoring Sectors: A Critical Comparison of Mexican Maquiladora Plants with Indian Outsourcing Offices

Article excerpt

INTRODUCTION

"Global competitiveness through outsourcing" sounds like a descriptive term, i.e., providing the business firm with an advantage over its competitors by transferring or subordinating functional activities to adept specialists in other countries (often called offshoring). Though it accurately describes a mushrooming host of international transactions observed in recent years,1 it also prescribes them with its implicit assumption that competitiveness will be efficient or beneficial for offshoring firms. We do not dispute that assumption herein; however, we do raise a more fundamental question - if outsourcing is intentional organizational design by managers, then exactly who are its intended beneficiaries?

In a recent Forum, the editors of the Administrative Science Quarterly (2002) let several authors delve deeply into the issue of who benefits from efficient organizations? As they all noted, the typical answer propagated in business schools and management institutes emanates from the viewpoint of senior managers and their principals, the equity investors. Nevertheless, there is no reason, historical or logical, that this must necessarily be the viewpoint taken (see Srivastava and Teo, 2006, for a non-positivist approach to organizational research). One could argue that the principal-agent view is too myopic and, indeed, in light of the demands of annual financial reporting, too short-term focused. Another perspective with a longer-term purview, and the one chosen by us, asks this question from the vantage point of national economic development. More specifically, we seek an answer to the question of how beneficial is outsourcing to the economic development of the recipient country and to the on-going corporation? In other words, is its effectiveness legitimate beyond the short-term payback earned by the business organization and its dominant managers/owners and out into the long-term future shared by the corporation and other societal members?

To shed light on this question for outsourcing/offshoring, the Indian Outsourcing Offices (IOO) sector, which has surged dramatically in the last ten years, is contrasted institutionally with Mexico's maquilas to uncover how offshoring has impacted national economic development. Not only are Mexico's maquilas an excellent example of a forty-year outsourcing endeavor, but they also provide an historical analogy that contrasts intriguingly with India's own past. Though there exist many differences between the two nations, at the mid-point of the last century leaders in both countries launched their nations on trajectories toward autarky or economic independence and away from financial links with developed nations. In Mexico, it was rooted in dependency theory and a reaction against the neo-colonialism of the United States. In India, autarky can be traced back to Congress* svadeshi (see Sen, 2005, for this historical link) and the reaction against British colonialism. Fifty years ago, in both countries, the current widespread practice of subordinating domestic business entities to large foreign firms with outsourcing contracts would have been viewed as too heretical, i.e. illegitimate. Nevertheless, that is exactly what has transpired, and because it occurred much sooner in Mexico, temporal logic dictates that our analysis start there.

In the next section, we offer an integrative institutional framework for understanding the benefits and legitimacy of offshoring at both the sectoral and national levels. We then summarize the Mexican historical context and discuss the Mexican Maquiladora Plants/Program (MMP). The structured activities of the MMP are coherently situated within the framework derived from institutional theory, and several statistical analyses are offered to reveal the Program's weak contribution toward Mexico's continuing development. In addition, we discuss its very recent legal demise. In light of this, we next review the Indian historical context and examine, given the available data, the IOO sector's legitimacy as it is currently emerging. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.