Date of Award
Doctor of Philosophy
Firms are outsourcing functions previously considered core competitive competencies. For example, many U.S. banks have contracted out their Information Technology (IT) functions. These relationships have taken the form of non-equity alliances. The thesis investigated: Why would firms outsource a core skill? Was this a sound strategic decision or one primarily motivated by immediate economic gain? Does this decision lead to the creation of sustainable competitive advantage and greater economic rents, or does it ultimately signal a surrendering of strategic sovereignty? In essence, does the accepted theory of competitive behaviour in bi-lateral market relationships apply to these non-equity alliances and the strategic networks created by a web of such alliances?;The research employed a multi-phase, multi-method approach, involving seven research cases in U.S. banks, 35 additional interviews and an empirical stock performance study. The research found that the banks had been motivated by a unique bundle of economic and strategic benefits. These involved access to scale and scope (market, technical and geographic) economies beyond their corporate capabilities.;The banks had experienced substantial improvements in both IT effectiveness and efficiency performance subsequent to outsourcing. No evidence was found that the bank executives thought that they had surrendered strategic sovereignty.;Research on tangible and intangible relationship characteristics found that agreements were long-term and comprehensive, not easily defined by formal contracts. The trust level between partners was high and had increased during the relationship. Although the alliances were clearly bi-lateral market relationships, they were not currently characterized by opportunistic behaviour.;The findings suggested broader theoretical implications. Although the thesis focused on the financial sector, the observed scale and scope advantages enabled theoretical propositions on the macro-economic conditions facilitating establishment of outsourcing networks. These could be used to predict their appearance in other industries. In addition, the research classified strategic networks into hierarchical and neural forms and also proposed that outsourcing's hierarchical networks are essentially a "supra" firm or hierarchy. Finally, the thesis presents a competitive analysis framework for industries with emerging outsourcing networks.
McLellan, Kerry, "Outsourcing Core Skills Into Non-equity Alliance Networks" (1993). Digitized Theses. 2188.