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Determinants of Interoutsourcing: An Analytical Approach
Author(s) -
Jiang Bin,
Talluri Srinivas,
Calantone Roger
Publication year - 2008
Publication title -
decision sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.238
H-Index - 108
eISSN - 1540-5915
pISSN - 0011-7315
DOI - 10.1111/j.1540-5915.2008.00182.x
Subject(s) - outsourcing , vendor , incentive , business , knowledge process outsourcing , industrial organization , service (business) , value (mathematics) , process (computing) , marketing , process management , microeconomics , computer science , economics , machine learning , operating system
Interoutsourcing is a round‐way process in which the vendor is its customer's customer and the customer is its vendor's vendor. While interoutsourcing is emerging as a prominent outsourcing strategy in many industries, there are no rigorous analytical studies focusing on this mechanism. In this article, we analytically demonstrate the efficacy of interoutsourcing by comparing it with normal outsourcing. Our results show that, compared with normal outsourcing, interoutsourcing acts as a self‐enforcer of vendor firms' behaviors toward increasing outsourcing service value. However, in situations where there is a mismatch of outsourcing activities, a high degree of incentive that is based on outsourcing service value, and a high cost of capital, interoutsourcing is not preferred to normal outsourcing. We discuss these results in detail and provide managerial implications for firms involved in interoutsourcing decisions.