A technological contingency perspective on the depth and scope of international outsourcing

In this study we present and test a technological contingency perspective on two dimensions of international outsourcing: depth and scope. The depth of international outsourcing refers to the ratio of foreign to total outsourcing. The scope of international outsourcing captures the degree of psychic dispersion between the country of operations and the countries a firm is outsourcing from. Using multiple regression analysis on a sample of 189 firms in the Netherlands, the effect of five technological contingency factors is measured: product innovation, technological and volume uncertainty, asset specificity, and the integration of the outsourcing function. A most interesting finding is that technological uncertainty and the degree of product innovation turn out to be both positively associated with a high scope/low depth type of international outsourcing and negatively associated with a low scope/high depth type of international outsourcing. The findings create a platform for a two-dimensional typology, which provides an explanatory logic for the expansion and development path of international outsourcing.