On April 26, 2017, 11.00-12.00, Prof. Silvia Massini (University of Insubria) will give a talk on ” Modularity and entry mode choice: mirroring technical and organizational architectures in business functions offshoring “.
This paper studies the relationship between modularity and entry mode choice by investigating the extent to which the technical architecture mirrors the organizational architecture within the context of business functions offshoring. Technical architecture is defined as the degree of modularity of an activity, i.e. whether it can be detached from the rest of the value chain without loss of synergies. As regards the organizational architecture, in the case of offshoring it refers to the entry mode chosen: whether a captive solution, a partnership or an external contractor (outsourcing). We propose that the selection of entry mode reflects a need to align the technical and organizational architectures. Modular activities are more likely to be outsourced, as modularity decreases both transaction costs and the risk of knowledge leakages, while not-modular activity reflects captive entry modes. Based on the analysis of 482 business function offshoring initiatives, we also argue that firms can “break” the mirror as the entry mode choice is contingent upon the level of fragmentation of the value chain and the offshoring experience of the firms.