The Effects of Offshoring on Innovation, Learning, and Knowledge Transfer

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This research explores the effects of offshoring on the creation, retention and transfer of knowledge in organizations. Offshoring, or the act of transferring some of a firm's recurring activities to outside providers, has increased significantly in recent years. Although cost savings are often the primary driver for offshoring, the impact of offshoring on productivity gains and knowledge transfer over the long term remains unclear.The researchers will examine the effects of offshoring on organizational learning and knowledge transfer. A method that generalizes a well-established learning-curve framework so that it captures the effects of offshoring on organizational learning and knowledge transfer has been proposed. The method will be fully specified as part of the research project. Its validity and usefulness will be tested through a prototype study at a global financial services firm that is transferring work done in one of its U.S. facilities to employees in a lower wage country. Data will be collected before, during and after the offshoring activity; effects on learning rates and knowledge transfer will be estimated. Not only will the work advance research about organizational learning, it will also provide information that can enable organizations to make better decisions about offshoring, decisions that take into account firm competitiveness and member well-being, not just cost savings.