Title: The effects of outsourcing versus captive offshoring.

Aim: What are the relative developmental advantages and disadvantages of equity and non-equity based offshoring?

Countries: India and China.

Project brief: The study will compare the effects of non-equity offshoring (outsourcing) and captive offshoring (FDI). It will examine, what the strategic considerations behind these two entry modes are and what their relative costs and benefits are.

The study will draw on the strategic management literature, in particular transaction cost theory; resource based theory, and institutional strategy theory, in order to examine the considerations and determinants of different entry modes as well as the implications of these modes for the interacting companies. A key hypothesis will be that FDI based off-shoring offers greater benefits to host countries in terms of learning, technology transfer and upgrading. Another hypothesis is that outsourcing and FDI should not be seen as alternatives, but rather (and increasingly so) as complementary entry modes.

The study will focus on the two largest sourcing countries for Danish industry, India and China, and it is conducted in collaboration with the Danish Industrialisation Fund for Developing Countries (IFU), which have facilitated contact to relevant Danish companies and provided background data on the internationalisation of Danish companies. Based on a major survey, the project has built a database over 92 Danish direct investments in developing countries. Moreover, case studies of direct investments and outsourcing arrangements in the two countries have been conducted.

Participants: Michael W. Hansen.

Time for field trips: India: Autumn/Winter 2006-2007, China, June 2006.