Transforming capabilities in offshoring processes: Longitudinal development of organisational resources and routines in four Danish offshoring enterprises

Purpose – This paper aims to focus on how organisational capabilities, enhancing the dynamic capability perspective, evolve during a more than five-year offshoring process in four Danish small- and medium-sized enterprises (SMEs). The strategic decision to offshore some manufacturing activities meant that capabilities were ruptured and had to be rebuilt. Design/methodology/approach – The empirical investigation took the form of qualitative case studies with a longitudinal orientation focussing in on a few events in the four cases (strategic change in the sourcing configuration) as a process research design (Pettigrew, 1990; Van de Ven, 2007). Interviews were transcribed and coded in NVivo. Findings – The four cases followed distinct trajectories, but they all changed their routines regarding how to handle knowledge, including both technology and human resources. A need for specific human resources acting as boundary spanners arose, transforming both intra- and inter-organisational practices in all four cases. More complex activities were moved offshore to enhance the dynamic capabilities of the companies regarding both product development as well as specific processes, thereby transforming/reconfiguring the organisational capabilities of the companies. However, in the two small-sized cases, more complex/less routinised activities were backsourced, demonstrating a significant problem over time with the development of sufficient organisational resources to maintain seizing and sensing capabilities within these companies in comparison with the two other medium-sized cases. Research limitations/implications – The fact that most of the data were generated from an inside-out perspective, taking the point of departure in the core firms, can be viewed as a limitation. The authors’ data on the wider network are also limited. Finally, the authors’ interviews are conducted relatively infrequently when considering the length of the process. Practical implications – The four longitudinal cases show that the longer-term offshoring journey does not involve a single path or a single best practice. The cases show captive as well as outsourcing arrangements and even enterprise transformations. The cases demonstrate a common focus on finding and nurturing core suppliers and core business processes, which can be characterised as continual learning and development of organising capabilities. Originality/value – The study contributes to the growing body of research into dynamic (organisational) capabilities in an offshoring and SME context.