Governance modes for offshoring activities: A comparison of US and German firms

A new field of research centered on the offshoring of white-collar tasks is opening. We analyze the choice of governance mode for international offshoring activities based on a four-fold framework that integrates multiple theoretical perspectives. Firms choose between an internal or external mode based on their institutional environment, the offshoring behavior of similar firms in their reference group, firm-specific characteristics and objectives, and the particular setting of specific implementations. We test our relationships using detailed data on offshoring activities of US and German firms. Based on the outcomes we conclude that each dimension of the chosen framework is needed to explain the governance mode decisions of firms and this overarching framework may also be applicable to other topics in internationalization research.

► We analyze governance mode choices of offshoring activities of US and German firms.
► We therefore develop a four-fold framework integrating multiple theoretical perspectives.
► We observe path dependency and imitative behavior in offshoring activities of US and German firms.
► Choice of governance mode differ with regard to motives of cost saving, market-seeking, and growth.
► Firms tend to prefer internal mode for knowledge-intensive and idiosyncratic functions.