Coordination of Service Offshoring Subsidiaries in Multinational Corporations

459 Pages·2009·1.519 MB·English

by  Matthias Daub (auth.)

Matthias Daub
Coordination of Service Offshoring Subsidiaries
in Multinational Corporations
GABLER RESEARCH
mir-Edition
Herausgeber / Editors:
Prof. Dr. Andreas Al-Laham
Technische Universität Kaiserslautern,
Prof. Dr. Johann Engelhard
Universität Bamberg,
Prof. Dr. Michael Kutschker
Universität Eichstätt, Ingolstadt,
Prof. Dr. Profs. h.c. Dr. h.c. Klaus Macharzina
Universität Hohenheim, Stuttgart,
Prof. Dr. Michael-Jörg Oesterle
Universität Bremen,
Prof. Dr. Stefan Schmid
ESCP-EAP Europäische Wirtschaftshochschule Berlin,
Prof. Dr. Martin K. Welge
Universität Dortmund,
Prof. Dr. Joachim Wolf
Universität Kiel
In der mir-Edition werden wichtige Ergebnisse der wissenschaftlichen Forschung
sowie Werke erfahrener Praktiker auf dem Gebiet des internationalen Managements
veröffentlicht.
The series mir-Edition includes excellent academic contributions and experiential
works of distinguished international managers.
Matthias Daub
Coordination of Service
Offshoring Subsidiaries in
Multinational Corporations
With a Foreword by Prof. Dr. Stefan Schmid

RESEARCH
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Dr. Matthias Daub finished his doctorate at ESCP-EAP Europäische Wirtschaftshochschule in Berlin, Chair
of International Management and Strategic Management. He now works as a management consultant
specializing on topics of strategy, globalization, and technology.
Dissertation ESCP-EAP Europäische Wirtschaftshochschule Berlin, 2008
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1. Auflage 2009
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Vorwort der Herausgeber
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Andreas Al-Laham, Johann Engelhard,
Michael Kutschker, Klaus Macharzina,
Michael-Jörg Oesterle, Stefan Schmid,
Martin K. Welge, Joachim Wolf
Preface

Nowadays, it is essential for a multitude of companies to engage in foreign markets. However,
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For the past 50 years, the international journal “mir – Management International Review”,
which is read in more than 40 countries, has seen itself committed to promoting an
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Besides the academic contributions of young scholars, the editors also welcome the relevant
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The selection process stipulates that the editors jointly decide on the publication of any book
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the academic discussion and to provide applied solutions for the challenges in the area of
international management.

Andreas Al-Laham, Johann Engelhard,
Michael Kutschker, Klaus Macharzina,
Michael-Jörg Oesterle, Stefan Schmid,
Martin K. Welge, Joachim Wolf
FOREWORD
Multinational Corporations (MNCs) benefit from their presence in various countries for
creating and enhancing their competitive advantage. In the past, many Western MNCs
reflected upon the question whether they should transfer some of the activities so far
carried out at home to foreign markets in order to guarantee or to increase their competi-
tiveness. While formerly the transfer of activities mainly concerned the production of
goods, more recently MNCs have offshored some of their services across borders. Cost
reasons are a major factor for service offshoring to countries in Asia or Central and
Eastern Europe. However, there are many additional rationales which may bring a
Western company to carry out some services in a foreign country, whereby the company
has the choice between a foreign subsidiary and a foreign partner.
The present contribution focuses on service offshoring of German MNCs in Central and
Eastern Europe. Matthias Daub is not only interested in the question whether we can
find different types of service offshoring centres; he also analyses in how far the coordi-
nation of a service offshoring centre depends on its respective role. In this way, Mat-
thias Daub interprets service offshoring centres as a specific type of subsidiary. The re-
search on which the publication is based can be linked to the research programme at my
department. For some time, at my department, we have been interested in the roles for-
eign subsidiaries can play and in the management which is appropriate for headquarters-
subsidiary relationships.
In his contribution, Matthias Daub develops a typology for service offshoring which is
theoretically grounded. He uses the resource-based view on the one hand and network
approaches on the other hand to come up with a four-cell matrix, based on two dimen-
sions. This enables him to differentiate four types of service offshoring units, i.e. “Ser-
vice Factories”, “Internal Competence Centers”, “Support Centers” and “Specialized
Contributors”. Matthias Daub’s identification of subsidiary roles is not an end in itself.
In his contribution, Matthias Daub is interested in the question in how far the four types
differ with respect to coordination. He establishes propositions which link the four types
of service offshoring units to structural, technocratic, personal and output control. The
propositions are confronted with rich empirical data. By using a selective sampling
method, Matthias Daub is able to find evidence for each of the four service offshoring
types. The empirical data gives him the opportunity to also empirically investigate the
relationships to coordination, as suggested by his propositions.
The work done by Matthias Daub is extremely relevant to the business world. Although
currently some MNCs re-locate foreign activities to the home country (after negative
X
experiences abroad), the majority of them are using service offshoring in some way or
the other. Managers benefit from Daub’s work, since it clearly shows that each service
offshoring centre requires a different coordination approach. This is due to the strategic
relevance of the services carried out, but also due to the specific approach to integration.
Furthermore, in his empirical study, Daub is able to find out that additional factors can
influence the appropriate coordination. By this, he shows that we should refrain from
too simplistic generalizations.
I am convinced that Matthias Daub’s work can have an impact on future research be-
yond its obvious relevance for management practice. Matthias Daub enriches the sub-
sidiary role stream in the International Business field; he also adds value to the general
business and management literature by showing applications of the resource-based view
and network approaches in empirical settings, and he contributes to the regionally fo-
cused literature in business and management by choosing Central and Eastern Europe as
his empirical setting. I wish all readers valuable insights when studying the present con-
tribution by Matthias Daub.

Berlin, April 2009 Stefan Schmid
PREFACE
Service offshoring has not only taken hold in multinational corporations in their at-
tempts to find the best location worldwide for their operations. It has also influenced
this thesis, for which providers of transcription services from the US and Bulgaria were
used. Though the coordination of one researcher and one transcriber involves relatively
little effort, it points in itself to some of the challenges that can occur for corporations in
the coordination of offshore operations. These are a source of fascination for me and
have laid the foundation for this study (that intends to analyze how companies coordi-
nate their service offshoring subsidiaries).
However, not only does this dissertation build on network theories, it has also been cre-
ated within a network that merits special mention and thanks. First and foremost, my
debt of gratitude is to Prof. Dr. Stefan Schmid from whom I have learned so much dur-
ing the time I had the possibility to work at his department. His academic rigor, his in-
sistence on delving deeper until a clear picture and results emerge, have made this work
successful and I have very much benefited from working with him. I have also enjoyed
the time there because of his great sense of humor. My second supervisor, Prof. Dr.
Hartmut Kreikebaum, has my deepest respect not only for his academic achievements
and his advice on how to advance this thesis but also for his integrity and for all his
support throughout my university years.
This work has benefitted from the many excellent contributions by members of the or-
ganizations who were interviewed in the empirical parts of the study and who cannot be
named for reasons of confidentiality. I am greatly indebted to them for their time and
valuable insights.
Projects at my employer McKinsey&Co. initially inspired me to explore the offshoring
waters. For their generous support along the way I am especially grateful to my current
and former colleagues Detlev Hoch, Dr. Peter Peters, Holger Friedrich, Dr. Markus Löf-
fler, Dr. Ulrich Freking, Tobias Schwarz, Dr. Markus Schaper, and Dr. Timo Meyn-
hardt.
My colleagues from the chair of International Management and Strategic Management
at the ESCP-EAP European School of Management Berlin, Monika Dammer, Andrea
Daniel, Swantje Hartmann, Thomas Kotulla, Dr. Katharina Kretschmer, Dr. Mario Ma-
chulik, Renate Ramlau, and Stephan Schulze, were always willing to brainstorm and
discuss new topics with me and go through parts of the thesis in great detail. In addition,
Vera Dobreva, Karen Finney-Kellerhoff, Christian Geiselmann, and Dr. Simon Kaja
have made the research process much easier for me and I have enjoyed working with
XII
them. The support of the Konrad-Adenauer foundation has helped me in many dimen-
sions but especially with regard to the possibility of discussing topics unrelated to my
dissertation and getting a fresh perspective on areas of life that are not subject to off-
shoring.
On a more personal note: I am deeply grateful to my family and my parents who have
foregone so much to support my education and help me grow and develop. My further
thanks go to my friends Prof. Dr. Michael Behnam, Dr. Stefan Behrens, Dr. Tobias
Popovi(cid:2), and Dipl.Kfm. Sascha Stürze for their critical comments, patience in pointing
me to flaws in the research design and for being there in need.
Without my wife Mihaela I would not be what I am and where I am today. I do not have
the words to express my gratitude for her encouraging words, her great support and her
love. The latest addition to our family, my daughter Hanna Katharina, has brought the
most joyful moments in my life. Finally, I thank my Lord and Savior Jesus Christ, for
richly blessing me, giving a meaning to my life and for making all of the above possi-
ble.

Berlin, Summer 2009 Matthias Daub