The Ceo’s Decision-Making Process Model on Service Offshore Outsourcing: Using Theory of Reasoned Action (Tra)

THE chief operating officerS DECISION-MAKING PROCESS MODEL ON SERVICE OFFSHORE OUTSOURCING USING THEORY OF REASONED ACTION (TRA) scratching Yang Department of Information, Operations and engine room Management College of Business Administration The University of Toledo 2801 W. Bancroft St. Toledo, Ohio, USA 43606 Phone (419) 787-3453 Fax (419) 530-2290 electronic mail emailprotected utoledo. edu Jeen Lim Department of Marketing and International Business College of Business Administration The University of Toledo 2801 W. Bancroft St. Toledo, Ohio, USA 43606 Phone (419) 530-2922 Fax (419) 530-4610 electronic mail jeen. emailprotected du ABSTRACT This present study seeks to fill the gap by providing the chief executive officers finish-making work exercise with regard to assistance shoreward outsourcing actuateivities which becomes valuable strategy to maintain watertights rivalrous advantage. Arguably, the chief executive officer is the main domain of decision making a uthority on such significant docket of the sloshed as servicing offshoring. The research molding includes 1) key antecedents of service offshoring deriving from various outsourcing literatures, 2) CEOs propensity (attitude and unobjective norm), end and way, and 3) regulative environmental factors.As a theoretical base, Theory of reason out action at law (TRA) exit be used. Managerial implication as well as next research concern will be provided. Keywords Offshore outsourcing, Key Antecedents of Service offshoring, Decision-making process, Chief Executive Officer (CEO), Theory of Reasoned Action (TRA) INTRODUCTION Recently, service offshoring has brought the tremendous increasing attention and concern to some(prenominal) practitioners and researchers collect to the rapidly-changing construction of the U. S. mployment and the growing importance of its signifi senst impact on the U. S. economy. This trend has been more and more visible due to the rise of globally inte grated intimacy economy, which has both good and bad impact on the U. S. economy it may be good because U. S. hards may enjoy the cost benefits, utilizing large best pools with comparatively low cost it may be also bad because they argon likely to lose turn back of their core businesses or lose white-collar jobs of the U. S. counterpart.Up to now, large body of research has addressed the various issues of service offshoring. However, current scholarly works tend to be fragmented and especially, few attempted to examine at heart of signs decision-making process with regard to service offshore outsourcing. Such decision-making process model may be useful to contribute to the previous 4491 body of research on service offshore outsourcing in that to my knowledge, very few papers produced from raising circumspection perspective (except 47) and this process model may attend to top prudence, esp.Chief Executive Officer (CEO) avoid to put one across hasty decision, resulting in saving huge stinting losses. This paper is organized as follows. The following section provides literature reviews. The third section presents the research model which includes such variables as 1) key antecedents which be major criteria for determining service offshoring drawn from the extant literatures on outsourcing activities 2) CEOs propensity 3) CEOs Intention and Behavior and 4) regulatory environment (moderating variable). serial of research propositions are developed.The conclusion section provides the managerial implication as well as future research direction. LITERATURE REVIEW The character reference of top heed on affecting buckrams strategy choices and mathematical process has been well-documented 13 14 40 9 15. Quality of withdrawership of top management, esp. CEO, takes the fate of the firm. For example, under Jack Welchs starership General electric automobile Company (GE) within 20 years has been drastically transformed into one of the largest and most ad mired order with $ 500 billions market revalue from a market capitalization of $12 billion.It shows the little role of CEO in advancing the firm in terms of organisational performance. Excellent outcomes embark on with wise and prudent decision-making. In that regard, CEO is pass oned the main domain of decision-making authority on important agenda of the firm such as offshoring service. Theory of Reasoned Action (TRA) 12 2 is a general model that does non specify the beliefs that are operative for a certain(a) port 8. The TRA postulates that ones behavior is find by his /her behavioral intention (BI) to perform the behavior.BI is divided into two conceptually distinct variables 1) ones attitude (A) toward performing the behavior, and 2) one subjective norm (SN) about performing the behavior. Once attitudes and subjective norms are formed, CEO may have inclination whether or non to make certain choices. Actual behavior is the transmission of such intention into action. Sig nificance of the role of environment on the strategy formulation and organizational outcome has been extensively examined 25 29 16 24. The CEOs decision to offshore serve will be greatly contingent on the regulatory environment a firm faces.The regulatory environment can, to some extent, act to drive on or hinder offshoring. Regulation environment becomes a moderating variable that can go bad or enhance the blood between (1) the drivers of offshoring and top managements propensity and (2) top managements propensity and intention and actual behavior. RESEARCH MODEL The research model is about the CEOs decision making process on service offshore outsourcing. It includes quaternity key antecedents (i. e. , decision-criteria) of service offshore outsourcing and the CEOs propensity, intention and behavior.This model also attempts to examine the moderating role of regulatory environment between (1) the key antecedents and the CEOs propensity and (2) the CEOs propensity and the CEOs i ntention and behavior. terms Advantage (18 19) Cost advantage refers to the extent to which a client firm can achieve cost reduction, productivity or profitability through service offshore outsourcing activities. wholeness of the most commonly quoted reasons is that managers feel that they can gain cost advantages by employing 4492 outside suppliers to perform certain services and produce certain products.Cost reduction remains the major explanation for the drivers of outsourcing. Some researchers argue that an important foundation of cost reductions is the outsourcing firms access to economies of scale and the distinctive know-how or expertise that a large outsourcing vender (i. e. , supplier) can bring. 4 32 Nohria and William 30 discovered that to be a steady industry winner, a firm must increase its productivity by around twice above than the industrys average. thither are a number of studies that focus on explaining the descent between outsourcing and productivity growth. Todays knowledge and service-based economy offers numerous opportunities for wellrun companies to increase profits through outsourcing 30. When used properly, outsourcing can boost profitability to the firm in many ways (i. e. , staffing, capabilities, facilities, and payroll, etc). The most obvious reason why a firm offshores services is also for cost advantage. In regard to offshoring activities, wage differential (i. e. , lower labor cost with similar quality of work) between U. S. and other developing countries motivates top management to offshore. Risk Control (17)Risk control refers to the stage to which a client firm control the happen such as amount of mixed outsourcing value (i. e. , scale of the hug), outsourcing complexity (i. e. , train of contract difficulty) and outsourcing epoch (length of the contract) that might occur through outsourcing. Management needfully to assess and evaluate the take chancess and their impact at various levels such as strategic, tact ical and operational levels 43. The level of contract complexity also can influence on the level of risk. Complexity refers to the percentage point to which activities are diversified with the outsourcing function.The more complex a contract is, the more risky its implementation is. Length of contract duration 19 can affect the complexity of an outsourcing relationship. When an outsourcing contracts duration requires a longer stop consonant of time, both diversity of business relationships and complexity of contract management increase. As a result, longer duration contracts expose the outsourcing company to greater level of risk due to managerial uncertainty. groundwork Maturity (17 23) Infrastructure maturity refers to the spot to which both firms (i. e. , client and vendor) have developed telecommunications (i. e. Internet and mobile telecommunication) and transportation (i. e. , logistics, 3PLs) theme. Technology advancement makes organizational and national borders less si gnificant when it comes to the decision regarding relocation of service functions. Telecommunication foot is essential for electronically transmitted services. Lack of telecommunication system will be a overleap for trade with U. S. Transportation infrastructure refers to the availability of logistics. The increase in competition and growing awareness of the role of logistics lead more companies to exploit the potential of outsourcing.Cultural Compatibility (20) Cultural compatibility refers to the degree to which both firms (i. e. , client and vendor) can interchangeably accept ethnical dissimilarities including language (i. e. , English), ethnic linkage, or heathen difference. In the context of a firms offshoring decision, language likeness between a client and vendor firm is important. Language similarity is measured by the extent to which a vendor firm is exposed to English (i. e. , English fluency). ethnic linkage is also important for offshoring outsourcing service activi ties. Ethnic linkage between the managers of both firms (i. . , client and vendor) in origin and destination countries increases cultural compatibility. Such 4493 linkage improves sociable capital 45. Cultural difference refers to the degree to which firms may not accept a counterparts culture. These cultural differences may increase difficulties associated with managing employees. We get that four factors that have influenced firms outsourcing decision will affect to some extent firms service offshoring decision. Therefore, we regard these four factors as the key antecedents of the CEOs decision for service offshore outsourcing.Theory of Reasoned Action (TRA) In firms decision-making for service offshoring, CEO is the key person who actually involves in that process with collaborative effort of top management and board of directors. According to TRA, attitude toward offshore outsourcing services is generated by the individuals owing(p) belief about the consequences of adopting service offshoring practices (behavioral beliefs) and evaluation of these consequences (i. e. , ordained or negative outcomes). Positive feelings toward offshoring will lead top management to form optimistic attitude, in turn intention to behave (i. e. willingness to offshore outsourcing services). later on thorough examination of the four key antecedents, i. e. , cost advantage, risk control, infrastructure maturity, and cultural compatibility, the CEO forms positive or negative attitude toward offshoring. Subjective norm is generated by the normative beliefs that the person attributes to what relevant others (i. e. , tender referents) expect her to do with respect to adopting offshoring services as well as her motivation to comply with those beliefs. friendly referents possibly include firms board of directors, stockholders, firms customers, or CIO 47.The strength of social referents normative belief and motivations will actually determine the CEOs final decision to offshore services. Once attitudes and subjective norms are formed, the CEO may have inclination whether or not to make decision for offshoring services. In turn, actual behavior will be transmitted from such intention. The above discussions lead to Proposition 1 The key antecedents of service offshore outsourcing, (a) Cost Advantage, (b) Risk Control, (c) Infrastructure Maturity, and (d) Cultural Compatibility will have a positive impact on top managements attitude and subjective norms to offshore outsourcing services.Proposition 2 Top managements positive attitude and norms that was formed through careful assessing key antecedents of service offshoring will have a positive impact on top managements actual behavior (i. e. , both intention and decision to offshore services). Moderating Effect regulatory Environment (17 20) Regulatory environment refers to explicit regulative processes, existing laws and triumphs that influence offshoring outsourcing 49. In this case, government plays a major role.For example, in case of offshoring software industry, government can affect restrict or facilitate the import and export of equipment, software, or data across the country. Government is also the main enforcers of intellectual stead laws (i. e. , patent, copyright) 36. Companies in the U. S. will not choose to offshore key functions if they are concerned about the bail of key processes or products 37. Generally, three types of regulatory factors can be categorized 1) Tariff/ Non-tariff barriers 2) privacy laws and 3) endure of law.We propose that above regulatory environment factors will play moderating roles in affecting the relationship between the key antecedents and the CEOs final decision to offshore outsourcing services. Proposition 3 The relationship between (1) the key antecedents and the CEOs propensity and (2) CEOs propensity and intention and behavior for offshore outsourcing services will be moderated by regulatory environment. 4494 Table 1 Key constructs (Def initions and load-bearing(a) Literatures) Construct Definition Literature Cost Advantage (CA) The degree to which a client firm can achieve cost reduction, operating efficiency (i. . , productivity) or profitability that is related to economic benefit through service offshore outsourcing activities Smith et al. , 1998 Jiang et al. , 2006 Jiang et al. , 2007 Risk Control (RC) The degree to which a client firm controls the risk that might occur through service offshore outsourcing activities, risk such as amount of involved value (i. e. , Scale of the contract), complexity (i. e. , Level of contract difficulty) and duration (Length of the contract). Smith et al. , 1998 Stremersch et al. , 2003 Carson, 2007 Jiang and Qureshi, 2006 Jiang et al. , 2007 Infrastructure Maturity IM) The degree to which both firms (i. e. , client and vendor) have developed telecommunications (i. e. , Internet and mobile telecommunication) and transportation infrastructure. Cultural Compatibility (CC) The de gree to which both firms (i. e. , client and vendor) can interchangeably accept different cultural backgrounds including language (i. e. , English), ethnic linkage, or cultural difference. Kshetri, 2007 Regulatory Environment (RE) Explicit regulative processes, existing laws and rules such as trade barriers, privacy laws and rule of law that influence service offshore outsourcing activitiesScott, 1995 Jahns et al. , 2006 Kshetri, 2007 Jahns et al. , 2006 Metters and Verma, 2008 Figure 2 Theoretical Model Key Antecedents Cost Advantage (CA) Risk Control (RC) Infrastructure Maturity (IM) H1 The CEOs Attitude and Subjective Norms toward offshoring Hservices 3 (PROPENSITY) Cultural Compatibility (CC) H3 Regulatory Environment (RE) 4495 H2 The CEOs DecisionMaking to offshore services (INTENTION) (BEHAVIOR) CONCLUSION Nowadays, outsourcing and offshoring decision is not an alternative option to choose but a mandatory passport to lead firms to sustain competitive advantages over rivals.I n this regard, this paper seems to be of less value because many firms offshore service jobs anyway. However, the key antecedents that were shown in present study may help management as useful decision tools and become full of life in succeeding to take in the full benefits of the offshoring activities to the firm. This is a meaningful attempt to go inside of firms decision-making process though it may not be perfectly useful for managerial decision. It is primarily because through this model, management can rethink in advance they launch the service offshoring activities, asking themselves why we pursue and then, how we can reap the full benefits. This present study attempted to consider four key antecedents of service offshoring which are important decision-credentials for top management, esp. CEO to offshore. Although these are not direct determinants of service offshoring decision, they are the ones in which firms need to consider before actual decision is made in that they e ncompass different aspects. Cost advantage and risk control are considered economic aspects. Since cost elements are always one of the most important reasons for firms decision of certain activities, cost advantage and level of risk control needs to be carefully examined before initial launch is kicked off.Infrastructure maturity is considered environmental or infrastructural aspect. Availability and development of telecommunication and transportation infrastructure is critical for service offshoringits fast and reliable delivery. Lastly, cultural compatibility is considered cultural aspect. Language (i. e. , English) fluency, ethnic linkage, or cultural difference will actually determine long-term relationship between a client and vendor firm across the country.These decision-criteria will help top management to consider the different aspects of offshoring activities, which are economic, environmental (infrastructural) and cultural dimensions. This present study also identified thr ee different aspects of regulatory environment which are trade barriers, privacy laws, and rule of law. Trade barriers are associated with a relation-type regulatory factor in that they determine the magnitude of relationship between countries which are involved in offshoring activities.Privacy laws are coupled with a risk-type regulatory factor in that lack of privacy laws will make a client firm to be exposed to information (data) loss. Rule of law such as political institution, court system or sound citizenship is linked with security-type regulatory factor in that poor rule of law (i. e. , vendor firm) is regarded as major obstacles to offshoring and cause to critical security problems. For future research, three major works need to be done. First, to make empirical study possible, measurement items for each key antecedent and CEOs propensity, intention and behavior need to be developed.For operationalization of key variables, more refined work should be continued. In this case, both secondary data and survey method may be appropriately used. Second, for completeness of the model or tho analysis, outcome and performance measure might be added. Third, for extension of this paper, it might be an interesting attempt if general decision-making process model which includes other top management teams and board of directors is provided. * References Available Upon Request (Mark Yang emailprotected utoledo. edu) 4496