The Role of Technological Complexity and Absorptive Capacity in Internalization Decision

Technology transfer costs have a profound influence on the firm’s entry mode into a production sharing relationship. To explore this nexus, we associate technological complexity of the off-shored input with the organizational mode of international production sharing by extending the Antràs (2005) model. We modify the Antràs model by proposing that the low-tech input, as qualified within the model, cannot be produced in the low wage south without costly technology transfer. The cost of technology transfer in turn depends on three factors, which are the technological complexity of this input, the absorptive capacity of the host country and the wages of the host country. Our model refines the results obtained in Antràs (2005). We find that 1. For high-tech goods, intra-firm transfer is preferred vis-à-vis outsourcing only for intermediate range of technological complexity of the off-shored input, 2. On the other hand, for low-tech goods, where the likelihood of outsourcing is higher in Antràs, intra-firm offshore contract is still possible for low range of technological complexity. Our model has policy suggestions for host countries which aspire to maximize their benefits from the exploding global production phenomenon. As the wage gap between the source and the host country falls, cost considerations for offshoring disappear. New sources of comparative advantage should therefore be created in the host country by subsidizing technology investment and higher education to build higher absorptive capacity.Outsourcing, Foreign Direct Investment, Technology Transfer, Absorptive Capacity.

The IT Compensation Challenge: Theorizing the Balance Among Multi-Level Internal and External Uncertainties

Attracting, motivating, and retaining Information Technology (IT) professionals has proven to be an ongoing challenge, regardless of the era in question. On average, almost two-thirds of the IT operating budget goes to staffing expenses, with managers and human resources experts struggling to balance IT compensation decisions with the uncertainties their organizations face. While there are many compensation studies that provide descriptive evidence using institutional variables, we lack a comprehensive IT compensation model that explores explanations for IT compensation decision factors from the angle of reducing IT-related uncertainties. This paper integrates concepts from traditional compensation literature, the role of non-monetary rewards, and a multi-level view of factors that influence IT compensation decisions. The use of multi-level factors is supported by traditional agency theory perspectives of compensation, and by contingency theory that looks at external and internal (organizational) contingencies. An interesting result of our analysis is that agency and contingency perspectives of risk provide insights on when fixed or variable pay plans may be more beneficial to the organization. There may be conditions when risk is logically lower, but overall IT compensation amounts will be higher. In particular, our paper proposes that IT compensation can be a viable IT governance mechanism in high-risk conditions when effective monitoring and performance measurement are less attainable, such as in outsourcing situations

“Asset Partner” Service model – Challenges and Opportunities for service industry. - A case from Norwegian Continental Shelf (NCS)

The oil and gas (O&G) industry is facing numerous challenges, including fluctuating oil prices, increasing regulatory pressures, and a growing demand for cleaner energy sources. To remain competitive and maximize value creation, companies must adopt customized and flexible approaches to their offshore operations and think of new solutions to solve tomorrow’s challenges. Examining the concept and implications of an Asset Partner reveals various opportunities and challenges for both operator- and service companies. In recent years, operational partnerships have emerged as a strategic solution for companies aiming to optimize their operations, minimize risks, and enhance their competitive edge. The Norwegian Continental Shelf (NCS) presents a unique operating environment, combining harsh climatic conditions, advanced technologies, and stringent safety and environmental standards. Operating in this challenging environment requires specialized knowledge, strong regulatory compliance, and a commitment to sustainable practices. By forming alliances with third-party service providers, O&G companies can leverage external expertise, share risks, and pool resources to achieve common objectives. While partnerships offer several benefits, there are also notable challenges in the collaboration between operator companies and oil service companies on the NCS. This thesis will examine various perspectives, including those of operator companies that typically manage their assets independently, as well as the viewpoints of oil service companies, trade unions, and governmental authorities. The thesis aims to investigate the following research questions: 1. What are the benefits and challenges of implementing an "Asset Partner" model in the Oil and Gas (O&G) industry, and how can it be used to increase competitiveness in the market? 2. How do regulations and authorities, such as the Petroleum Safety Authority (PSA) impact the implementation and success of the "Asset Partner" model in the O&G industry? 3. How does the "Asset Partner" model compare to traditional contractor and partnership models such as Technical Service Provider (TSP) model. 4. What are the specific business models and strategies that can be used to effectively implement the "Asset Partner" model in the O&G industry? A case study was conducted, involving data collection through interviews with professionals representing various roles in the industry. These included individuals from operator companies, oil service companies, trade unions, and government or regulatory authorities. The insights gathered from their responses have served as the base for addressing the research questions. The study reveals the complications and aspects related to the Asset Partner model. It provides a comprehensive understanding of the opportunities, challenges, and potential future implications of this model from the perspectives of operator companies, trade unions, oil service companies, and governmental authorities. It reveals that the Asset Partner model in the O&G industry offers the potential of significant benefits, including increased efficiency, cost savings, and access to specialized resources I terms of competence and capacity. However, challenges such as the loss of control over critical activities and potential erosion of core competencies must be carefully managed. The green transition and technological advancements can also have an impact in the future of the Asset Partner model in the future, emphasizing the need for regulatory adjustments for its sustainable implementation and alignment with environmental goals. To effectively implement the Asset Partner model, clear contractual agreements, open communication, performance monitoring, risk management, and competence development are essential. The research suggests a need for further research and collaboration among stakeholders to develop best practices, guidelines, and regulatory frameworks for the successful operation of the Asset Partner model in the O&G industry

Antecendents and Consequences of Modularization in BPO - Based on Transaction Cost Theory and Knowledge-based Theory

Business process outsourcing (BPO) is expected to be “the next big wave” in the development of information technology services. However, managing the tacit knowledge underlying the interfaces is costly and complicated. Modularization of the outsourced business process can mitigate such complexity and the risk of knowledge misappropriation. This research-in-progress paper introduces the concept of modularization of outsourced business process (MOBP), which is viewed as the operational concept of “modular global sourcing” proposed by Infosys, a leading Indian outsourcing provider. Standing the position of the client firm, we examine the antecedents and consequents of MOBP based on transaction cost economics theory and knowledge-based theory. We explore the impacts of process human asset specificity, environmental uncertainty, behavioral uncertainty, small-number trading, strategic criticality of process knowledge, and process knowledge ambiguity on the extent of MOBP and also the impacts of MOBP on cost reduction and knowledge spillover. This paper also describes the research plan to test the research hypotheses. Contributions to research and practice are highlighted