Global offshoring portfolio diversity and performance implications

Purpose: The purpose of this paper is to examine how three key dimensions of a firm’s offshoring portfolio – location diversity, functional diversity and governance mode – affect the financial and innovation outcomes of offshoring. Design/methodology/approach: The authors investigate the relationships between the diversity of a firm’s offshoring portfolio and its offshoring outcomes using a sample of US, European and Asia Pacific firms engaging in offshoring activities. Findings: The authors found that: location diversity shows a significant “flipped S-shape” relationship with innovation outcomes, but has a negative impact on financial outcomes, functional diversity has a significant and positive effect on innovation outcome and the use of an outsourcing governance mode significantly moderates these relationships, such that the degree of offshore outsourcing weakens some of these effects. Originality/value: The authors conclude that firms which strategically coordinate all three dimensions of their offshoring portfolio are more likely to achieve better innovation or financial outcomes from their use of offshoring in global supply chain and sourcing.