Offshoring of Intangibles: Organizational and Strategic Issues

Scholars from a variety of research traditions have provided interesting insights into offshoring. For instance, international business (IB) scholars have documented the movement of production operations to overseas locations (e.g. Dunning, 1988), and management scholars have investigated global sourcing strategies focusing on the outsourcing of components to vendors (Kotabe and Omura, 1989; Kotabe and Murray, 1990). Scholars commonly distinguish between relocation of economic activities to foreign subsidiaries, captive offshoring, and relocation to external independent suppliers, offshore outsourcing (Lewin and Peeters, 2006; Doh et al., 2009). With this special issue of Industry and Innovation, we focus upon a particular type of offshoring: that of intangibles. Offshoring of intangibles refers to the “process of sourcing any business task, process, or function supporting domestic and global operations from abroad, in particular from lower cost emerging economies” (Manning et al., 2008: 35). Over the last years, this practice has targeted increasingly higher value-adding activities related to a firm’s core business, such as research and development (R&D), engineering services and product design (von Zedtwitz and Gassmann, 2002; Bardhan, 2006; Chakrabarty et al., 2006; Couto et al., 2006; Manning et al., 2008). Offshoring of intangibles appears to be driven not only by cost saving, but also by a global sourcing-of-knowledge rationale, and must be seen as a novel type of internationalization (Maskell et al., 2007). In the early 2000s (Lewin and Cuoto, 2007), the percentage of firms experimenting with offshoring of intangibles rapidly rose from around 5 percent to more than 30 percent, mostly involving services such as engineering design, data processing and analysis, software development, R&D and web hosting (Zaheer et al., 2009).