Coordinating offshored operations in emerging economies: A contingency-based study

Abstract

Effective coordination is an important determinant of performance in globally dispersed offshored operations. This is an under-researched area particularly regarding the contextual factors that drive the choice of coordinating modes, and whether the most effective coordinating modes depend on the specific context. This study explores the intra- and inter-organizational coordinating modes of 15 subsidiaries of Italian-owned companies located in Argentina, investigating the link between coordinating modes and types of offshored operations. Intra-organizational coordination is mainly between the Argentine subsidiary and Italian headquarters, while inter-organizational coordination is with global suppliers and those local to the Argentine subsidiary. The analysis has found that when only sales are offshored, intra-organizational coordination is heavily centralized with the headquarters. However, when manufacturing is also offshored, other internal modes of coordination are needed and inter-organizational coordination with local and global suppliers becomes important. The most promising practices depend on contextual factors like product features (e.g. technological content), production cost structure (import duties), local economic conditions (e.g. exchange rates and local economic instability), regulations (trade agreements), infrastructure, and subsidiary size. The paper provides a unique contribution by investigating both intra- and inter-organizational subsidiary coordinating modes, and by taking into account the impact of contextual factors on such decisions. The results lead to six propositions for further investigation on network structure and coordination in offshored operations.