The Ceo’s Decision-Making Process Model on Service Offshore Outsourcing: Using Theory of Reasoned Action (Tra)

THE chief run officerS DECISION-MAKING PROCESS MODEL ON SERVICE OFFSHORE OUTSOURCING USING possibleness OF REASONED ACTION (TRA) Mark Yang part of Information, Operations and Technology anxiety College of Business Administration The University of Toledo 2801 W. Bancroft St. Toledo, Ohio, USA 43606 mobilize (419) 787-3453 Fax (419) 530-2290 E-mail emailprotected utoledo. edu Jeen Lim Department of Marketing and International Business College of Business Administration The University of Toledo 2801 W. Bancroft St. Toledo, Ohio, USA 43606 Ph integrity (419) 530-2922 Fax (419) 530-4610 E-mail jeen. emailprotected du ABSTRACT This present try out efforts to fill the time out by dint of and through providing the chief executive officers determination-making process model with regard to go inshore outsourcing activities which ploughs weighty dodging to maintain dissipateds warring advantage. Arguably, the chief operating officer is the main domain of decision making author ity on such classic agenda of the firm as aid offshoring. The search model includes 1) key antecedents of do offshoring deriving from several(a) outsourcing literatures, 2) CEOs appetency ( spot and inhering norm), object and manner, and 3) regulatory surroundal brokers.As a supposed base, Theory of cause Action (TRA) draw be used. Managerial implication as well as future research direction go out be provided. lynchpinwords Offshore outsourcing, Key Antecedents of Service offshoring, Decision-making process, Chief Executive ships officer (CEO), Theory of Reasoned Action (TRA) INTRODUCTION Recently, suffice offshoring has brought the tremendous increase attention and concern to twain practitioners and researchers due to the rapidly-changing structure of the U. S. mployment and the growing splendour of its signifi empennaget impact on the U. S. economy. This trend has been more(prenominal) and more plain due to the rise of globally integrated knowledge econom y, which has both good and bad impact on the U. S. economy it whitethorn be good because U. S. firms may enjoy the toll benefits, utilizing large best pools with relatively low cost it may be also bad because they be likely to lose oblige of their core businesses or lose clerical jobs of the U. S. counterpart.Up to now, large body of research has addressed the various issues of service offshoring. However, present-day(prenominal) scholarly whole works tend to be fragmented and especially, few seek to examine inside of firms decision-making process with regard to service inshore outsourcing. Such decision-making process model may be useful to contribute to the previous 4491 body of research on service seaward outsourcing in that to my knowledge, very few papers produced from pass off focal point stead (except 47) and this process model may help top attention, esp.Chief Executive officeholder (CEO) avoid to grant hasty decision, resulting in saving huge economical losses. This paper is organized as follows. The following section provides literature reviews. The 3rd section presents the research model which includes such variables as 1) key antecedents which ar major criteria for determining service offshoring drawn from the extant literatures on outsourcing activities 2) CEOs propensity 3) CEOs Intention and Behavior and 4) regulatory environs (moderating variable). Series of research propositions be developed.The conclusion section provides the managerial implication as well as future research direction. lit REVIEW The role of top attention on minting firms strategy choices and performance has been well-documented 13 14 40 9 15. Quality of leadership of top management, esp. CEO, memorises the fate of the firm. For example, under knucklebones Welchs leadership General Electric Company (GE) within 20 years has been drastically transformed into one of the largest and most admired guild with $ 500 billions commercialise lever from a market capitalization of $12 billion.It shows the critical role of CEO in march on the firm in terms of organizational performance. Excellent gists start with irreverent and prudent decision-making. In that regard, CEO is considered the main domain of decision-making authority on important agenda of the firm such as offshoring service. Theory of Reasoned Action (TRA) 12 2 is a general model that does non specify the beliefs that are operative for a authorized behavior 8. The TRA postulates that ones behavior is determined by his /her behavioral target (BI) to perform the behavior.BI is divided into ii conceptually distinct variables 1) ones spatial relation (A) toward performing the behavior, and 2) one subjective norm (SN) about performing the behavior. Once attitudes and subjective norms are formed, CEO may down inclination whether or not to make certain choices. Actual behavior is the transmission of such intention into action. importee of the role of environment on the strategy formulation and organizational outcome has been extensively examined 25 29 16 24. The CEOs decision to seaward run will be greatly contingent on the regulatory environment a firm faces.The regulatory environment can, to some extent, act to facilitate or hinder offshoring. Regulation environment becomes a moderating variable that can weaken or enhance the relationship among (1) the drivers of offshoring and top managements propensity and (2) top managements propensity and intention and actual behavior. RESEARCH MODEL The research model is about the CEOs decision making process on service offshore outsourcing. It includes tetrad key antecedents (i. e. , decision-criteria) of service offshore outsourcing and the CEOs propensity, intention and behavior.This model also attempts to examine the moderating role of regulatory environment in the midst of (1) the key antecedents and the CEOs propensity and (2) the CEOs propensity and the CEOs intention and behavior. follow A dvantage (18 19) equal advantage refers to the extent to which a client firm can secure cost reduction, productivity or favorableness through service offshore outsourcing activities. One of the most commonly quoted reasons is that managers feel that they can gain cost advantages by employing 4492 outside suppliers to perform certain services and produce certain products. court reduction remains the major explanation for the drivers of outsourcing. Some researchers argue that an important foundation of cost reductions is the outsourcing firms access to economies of carapace and the characteristic know-how or expertise that a large outsourcing vendor (i. e. , supplier) can bring. 4 32 Nohria and William 30 find that to be a steady patience winner, a firm must(prenominal) increase its productivity by around twice above than the industrys average. There are a number of studies that focus on explaining the relationship between outsourcing and productivity growth.Todays knowled ge and service-based economy offers many opportunities for wellrun companies to increase profits through outsourcing 30. When used properly, outsourcing can boost profitability to the firm in many ways (i. e. , staffing, capabilities, facilities, and payroll, etc). The most obvious reason why a firm offshores services is also for cost advantage. In regard to offshoring activities, wage disparateial (i. e. , lower labor cost with comparable with(predicate) quality of work) between U. S. and other developing countries motivates top management to offshore. venture Control (17)Risk potency refers to the peak to which a client firm control the encounter such as amount of involved outsourcing esteem (i. e. , scale of the contract), outsourcing complexity (i. e. , level of contract difficulty) and outsourcing duration (length of the contract) that might occur through outsourcing. Management involves to assess and evaluate the risks and their impact at various levels such as strat egic, tactical and operational levels 43. The level of contract complexity also can influence on the level of risk. Complexity refers to the breaker point to which activities are diversified with the outsourcing function.The more complex a contract is, the more risky its implementation is. Length of contract duration 19 can affect the complexity of an outsourcing relationship. When an outsourcing contracts duration requires a longer blockage of time, both diversity of business relationships and complexity of contract management increase. As a result, longer duration contracts expose the outsourcing company to greater level of risk due to managerial uncertainty. al-Qaeda Maturity (17 23) Infrastructure maturity date refers to the degree to which both firms (i. e. , client and vendor) have developed telecommunications (i. e. profits and ready telecommunication) and transportation (i. e. , logistics, 3PLs) base of operations. Technology advancement makes organizational and nati onal borders less monumental when it comes to the decision regarding relocation of service functions. Telecommunication infrastructure is essential for electronically transmitted services. Lack of telecommunication system will be a hurdle for trade with U. S. Transportation infrastructure refers to the availability of logistics. The increase in competition and growing awareness of the role of logistics lead more companies to utilise the potential of outsourcing.Cultural Compatibility (20) Cultural compatibility refers to the degree to which both firms (i. e. , client and vendor) can interchangeably accept cultural dissimilarities including language (i. e. , position), ethnic linkage, or cultural digression. In the context of a firms offshoring decision, language similarity between a client and vendor firm is important. oral communication similarity is metrical by the extent to which a vendor firm is exposed to English (i. e. , English fluency). heathen linkage is also importa nt for offshoring outsourcing service activities. Ethnic linkage between the managers of both firms (i. . , client and vendor) in origin and close countries increases cultural compatibility. Such 4493 linkage improves social capital 45. Cultural difference refers to the degree to which firms may not accept a counterparts culture. These cultural differences may increase difficulties associated with managing employees. We propose that four factors that have influenced firms outsourcing decision will affect to some extent firms service offshoring decision. Therefore, we regard these four factors as the key antecedents of the CEOs decision for service offshore outsourcing.Theory of Reasoned Action (TRA) In firms decision-making for service offshoring, CEO is the key somebody who actually involves in that process with collaborative effort of top management and bill of directors. According to TRA, attitude toward offshore outsourcing services is generated by the various(prenominal)s salient belief about the consequences of adopting service offshoring practices (behavioral beliefs) and evaluation of these consequences (i. e. , corroborative or negative outcomes). Positive feelings toward offshoring will lead top management to form optimistic attitude, in turn intention to behave (i. e. willingness to offshore outsourcing services). After careful examination of the four key antecedents, i. e. , cost advantage, risk control, infrastructure maturity, and cultural compatibility, the CEO forms domineering or negative attitude toward offshoring. Subjective norm is generated by the prescriptive beliefs that the person attributes to what relevant others (i. e. , social referents) expect her to do with respect to adopting offshoring services as well as her motivation to comply with those beliefs. Social referents possibly include firms board of directors, stockholders, firms customers, or CIO 47.The strength of social referents normative belief and motivations will ac tually determine the CEOs lowest decision to offshore services. Once attitudes and subjective norms are formed, the CEO may have inclination whether or not to make decision for offshoring services. In turn, actual behavior will be transmitted from such intention. The above discussions lead to marriage offer 1 The key antecedents of service offshore outsourcing, (a) Cost Advantage, (b) Risk Control, (c) Infrastructure Maturity, and (d) Cultural Compatibility will have a positive impact on top managements attitude and subjective norms to offshore outsourcing services.Proposition 2 Top managements positive attitude and norms that was formed through careful assessing key antecedents of service offshoring will have a positive impact on top managements actual behavior (i. e. , both intention and decision to offshore services). lead Effect Regulatory Environment (17 20) Regulatory environment refers to explicit regulative processes, existing laws and rules that influence offshoring outs ourcing 49. In this case, government plays a major role.For example, in case of offshoring software industry, government can affect restrict or facilitate the import and export of equipment, software, or data across the country. regimen is also the main enforcers of intellectual property laws (i. e. , patent, copyright) 36. Companies in the U. S. will not choose to offshore key functions if they are concerned about the security of key processes or products 37. Generally, three types of regulatory factors can be categorise 1) Tariff/ Non-tariff barriers 2) concealment laws and 3) rule of law.We propose that above regulatory environment factors will play moderating roles in affecting the relationship between the key antecedents and the CEOs final decision to offshore outsourcing services. Proposition 3 The relationship between (1) the key antecedents and the CEOs propensity and (2) CEOs propensity and intention and behavior for offshore outsourcing services will be moderated by re gulatory environment. 4494 Table 1 Key constructs (Definitions and Supporting Literatures) Construct Definition Literature Cost Advantage (CA) The degree to which a client firm can achieve cost reduction, operating efficiency (i. . , productivity) or profitability that is related to economic benefit through service offshore outsourcing activities Smith et al. , 1998 Jiang et al. , 2006 Jiang et al. , 2007 Risk Control (RC) The degree to which a client firm controls the risk that might occur through service offshore outsourcing activities, risk such as amount of involved value (i. e. , Scale of the contract), complexity (i. e. , Level of contract difficulty) and duration (Length of the contract). Smith et al. , 1998 Stremersch et al. , 2003 Carson, 2007 Jiang and Qureshi, 2006 Jiang et al. , 2007 Infrastructure Maturity IM) The degree to which both firms (i. e. , client and vendor) have developed telecommunications (i. e. , Internet and mobile telecommunication) and transportation infrastructure. Cultural Compatibility (CC) The degree to which both firms (i. e. , client and vendor) can interchangeably accept different cultural backgrounds including language (i. e. , English), ethnic linkage, or cultural difference. Kshetri, 2007 Regulatory Environment (RE) Explicit regulative processes, existing laws and rules such as trade barriers, privacy laws and rule of law that influence service offshore outsourcing activitiesScott, 1995 Jahns et al. , 2006 Kshetri, 2007 Jahns et al. , 2006 Metters and Verma, 2008 Figure 2 Theoretical Model Key Antecedents Cost Advantage (CA) Risk Control (RC) Infrastructure Maturity (IM) H1 The CEOs Attitude and Subjective Norms toward offshoring Hservices 3 (PROPENSITY) Cultural Compatibility (CC) H3 Regulatory Environment (RE) 4495 H2 The CEOs DecisionMaking to offshore services (INTENTION) (BEHAVIOR) CONCLUSION Nowadays, outsourcing and offshoring decision is not an alternating(a) option to choose but a mandatory passport to lead firms to sustain competitive advantages over rivals.In this regard, this paper seems to be of less value because many firms offshore service jobs anyway. However, the key antecedents that were shown in present study may help management as useful decision tools and become critical in succeeding to reap the full benefits of the offshoring activities to the firm. This is a meaningful attempt to go inside of firms decision-making process though it may not be perfectly useful for managerial decision. It is primarily because through this model, management can rethink before they launch the service offshoring activities, asking themselves why we pursue and then, how we can reap the full benefits. This present study essay to consider four key antecedents of service offshoring which are important decision-credentials for top management, esp. CEO to offshore. Although these are not direct determinants of service offshoring decision, they are the ones in which firms need to consider before a ctual decision is made in that they encompass different aspects. Cost advantage and risk control are considered economic aspects. Since cost elements are always one of the most important reasons for firms decision of certain activities, cost advantage and level of risk control needs to be carefully examined before initial launch is kicked off.Infrastructure maturity is considered environmental or infrastructural aspect. Availability and development of telecommunication and transportation infrastructure is critical for service offshoringits fast and reliable delivery. Lastly, cultural compatibility is considered cultural aspect. Language (i. e. , English) fluency, ethnic linkage, or cultural difference will actually determine long-term relationship between a client and vendor firm across the country.These decision-criteria will help top management to consider the different aspects of offshoring activities, which are economic, environmental (infrastructural) and cultural dimensions. T his present study also set three different aspects of regulatory environment which are trade barriers, privacy laws, and rule of law. Trade barriers are associated with a relation-type regulatory factor in that they determine the magnitude of relationship between countries which are involved in offshoring activities.Privacy laws are coupled with a risk-type regulatory factor in that neediness of privacy laws will make a client firm to be exposed to information (data) loss. Rule of law such as policy-making institution, court system or sound citizenship is linked with security-type regulatory factor in that poor rule of law (i. e. , vendor firm) is regarded as major obstacles to offshoring and cause to critical security problems. For future research, three major works need to be done. First, to make empirical study possible, posterment items for each key antecedent and CEOs propensity, intention and behavior need to be developed.For operationalization of key variables, more refine d work should be continued. In this case, both secondary data and survey method may be appropriately used. Second, for completeness of the model or further analysis, outcome and performance measure might be added. Third, for extension of this paper, it might be an interesting attempt if general decision-making process model which includes other top management teams and board of directors is provided. * References Available Upon Request (Mark Yang emailprotected utoledo. edu) 4496