Which of the following implications is suggested by the resource based view for managers success in global business?

Offshore outsourcing occurs when firms hand over their value chain activities to foreign, independent service providers (Bunyaratavej et al., 2008, Doh, 2005). Research delving into the intricacies of this phenomenon stress that offshore service providers are important ally in the value creation mechanism (Kedia and Mukherjee, 2009, Zaheer et al., 2009) and that success of offshore outsourcing is largely contingent on their performance. Very little attention, however, has been accorded to understand the context of offshore service providers (Lahiri and Kedia, 2009, Zaheer et al., 2009). In particular, research focusing on their internal assets and overall performance has remained inadequate so far. In this paper, we attempt to examine the empirical linkages among provider firm-specific resources, capabilities, and performance, and shed light on the competitive dynamics of Indian offshoring service providers.

Resource-based view (RBV) of the firm suggests that ability to attain higher performance is determined by the nature of strategic resources possessed and utilized by firms (Barney, 1991, Wernerfelt, 1984). Extending this view to the current context suggests that performance of offshore outsourcing provider firms should be a function of various strategic resources that are possessed and deployed by these firms. Indeed, several firm-specific resources, such as human capital, organizational capital, client-provider partnership quality etc., have been highlighted in the literature as crucial determinants of provider firm performance (Feeny et al., 2005, Lahiri and Kedia, 2009). These resources, in addition to being possessed, need to be strategically deployed and leveraged (Sirmon et al., 2008, Sirmon and Hitt, 2003) by firms in order to generate superior performance and competitive advantage. More specifically, while a provider firm's idiosyncratic resources and innovative knowledge assets may contribute to its performance (He & Wang, 2009), such resources must be managed and deployed effectively to realize competitive advantage. International business (IB) and strategic management scholars have called for studies that identify firm-level capabilities needed to effectively manage various organizational resources (Manning et al., 2008, Sirmon et al., 2007). In responding to such calls, this study intends to fill an important research void by exploring the moderating influences of management capability on the degree to which firm-specific resources are able to contribute to firm performance. We propose that improving provider performance through rent generating resources requires an emphasis on management capability, defined as the ability to assemble, integrate, and deploy various firm-specific resources, in particular human, organizational and relational, to fulfill diverse client-related business requirements (Lahiri & Kedia, 2009).

We studied 105 Indian business process offshoring (BPO) service provider firms to examine our central research question. Empirically, we showed that performance effects of two firm-level resources (human capital and organizational capital), and one relational resource (partnership quality) improve in the presence of a firm level capability (management capability). The Indian BPO industry presented a perfect setting for our investigation for several compelling reasons. First, India remains the top choice among various offshoring destinations for western client firms (Luo et al., 2010, Zaheer et al., 2009). Findings from this setting are thus likely to have crucial impact on the offshore outsourcing clients and providers from other emerging countries. Second, Indian BPO industry has evolved from low-value added services (e.g., call centers) to high-value added knowledge-based services. This helps to examine the research question across a broad range of high-value business processes. Finally, as one of the world's largest and most dynamic economies, India-based studies add value to our overall understanding of the global business environment (Lahiri, in press, Malik and Kotabe, 2009).

This analysis contributes to the growing body of offshore outsourcing literature and focus attention on the relatively under-explored Indian BPO industry that caters to more than 35% of the global BPO market and has been growing at the rate of more than 35% per annum for the last several years (Nasscom-Everest Study, 2008). Our empirical analysis of the providers’ context and the resultant findings generate important theoretical and practical insights that add to the scholarship that focuses on the performance implications of valuable firm assets. We also contribute by enhancing the applicability of RBV in a new industry and its participating firms. Furthermore, we respond to calls in the resource-based literature to illuminate how organizational capabilities may moderate the resource attributes to generate improved performance (Priem and Butler, 2001, Sirmon et al., 2008) for offshore outsourcing providers. Finally, by focusing on offshore service providers we enrich the IB literature since performance dynamics of these emerging market firms may determine the viability of offshore outsourcing of IT-enabled business processes as a strategic tool. Indirectly, our analysis also sheds light on the central question in IB—what determines the international success and failure of (offshore outsourcing client) firms? (Peng, 2004).

Offshore outsourcing of information technology enabled business processes: role of service providers

Business processes are ‘actions that firms engage in to accomplish some business purpose or objective. Thus, business processes can be thought of as the routines or activities that a firm develops in order to get something done.....’ (Ray, Barney, & Muhanna, 2004, p.24). When clients engage in BPO they essentially disaggregate their firms’ value chain and hand over parts thereof to providers for successful execution and delivery of the executed processes. Although cost savings remain the major

Theoretical background

Inherent in BPO partnerships is clients’ dependence on the expertise of providers and the latter's ability to utilize such expertise in providing valuable services to the former (Kedia and Lahiri, 2007, Sen and Shiel, 2006). Although business expectations of clients and providers vary, the source of success for both partners hinge on the providers’ resource-base and how expertise arising from such resource-base is suitably utilized. In this context, RBV seems to be the appropriate theoretical

The effect of provider firm-specific resources on firm performance

Human capital refers to skills, education, experience, and knowledge of a firm's employees (Becker, 1964, Hatch and Dyer, 2004). Scholars suggest that human capital is essential for firms to achieve above-average performance and competitive advantage (Hatch and Dyer, 2004, Hitt et al., 2006). Skills, knowledge, abilities arising from education and experience, and embedded within human actors allow precise comprehension of various organizational functions and subsequent efficient execution of

Sample and data collection

Hitt and colleagues suggested that “[T]he challenge in testing the resource-based view of the firm is identifying and measuring the most critical resources of firms. To do so, it is helpful to focus on a single industry” (2001, pp. 17–18). The context of our study is the Indian BPO provider industry and our sample includes firms that provide BPO services to their global clients. We collected data through questionnaire survey. Firms’ top executives responded to our questionnaire online. Top

Discussion

In this study we have enhanced understanding of offshore outsourcing as a growing organizational strategy by focusing on provider firms that execute business processes for their global clients. Drawing on the theoretical underpinnings of RBV, we addressed how management capability of providers impact resource–performance relationships. Results indicated that three intangible resources – human capital, organizational capital, and partnership quality – influence firm performance positively and

Limitations and avenues of future research

In spite of several important contributions, the findings of this study must be interpreted against a backdrop of limitations. First, our analysis relied on subjective performance measures as objective data was not available. While use of subjective data is common in organizational research involving survey research design, and scholars observe that such data assume significance when they come from top managers who possess comprehensive knowledge about their firms’ operations and performance (

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