Working Paper Series, Department of Industrial Economics & Strategy, Copenhagen Business School
Limits to Outsourcing and the Evolutionary Perspective on Firm Boundaries.
Abstract: Although there is reason to expect that outsourcing plays
an increasingly important role in world of commerce, theories of firm
boundaries poorly address associated processes of governance change. This
paper seeks to address this gap in the spirit of the evolutionary theory of
the firm. This approach highlights the significance of outsourcing as a
“process of shifting from internal to external procurement of activities.
Adopting an evolutionary process perspective suggests limits to outsourcing
due to governance inseparability and partly tacit complementarity of
capabilities as well as related dis-aggregation costs, including the costs
of knowledge codification in the specification of interfaces in
supplier/buyer relations, loss of absorptive capacity and integrating
capabilities in the supplier’s system. A key departure from earlier
approaches to firm boundaries is an explanation of such limits to
outsourcing and their impact on two interrelated sources of efficiency:
incentives and capabilities. For instance, when limits to outsourcing
obtain, governance change for particular activities involves compromises of
capability- and/or incentive efficiency in the experimental determination
of organizational boundaries. Also discussed are environmental dynamics
that variously emphasise efficiency properties of dispersed or concentrated
ownership and capability development.
Before downloading any of the electronic versions below
you should read our statement on
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Design by Joachim Ekebom