How does offshore outsourcing of knowledge-intensive activities affect the exports and financial performance of emerging market firms?

The extant literature on offshore outsourcing has focused on large traditional multinational enterprises from the OECD countries, and on their decisions to relocate production- and operations-related activities outside their home country in order to enhance their performance. By contrast, we examine the strategy of firms from emerging economies outsourcing knowledge-intensive activities abroad to improve their competitiveness. Using panel data of 1655 Indian firms over a 13-year period, we find that offshore outsourcing of knowledge-intensive resources makes firms more competitive in the international market, enhancing their exports and financial performance. Moreover, the positive impact of offshore outsourcing on firm profitability is greater as international sales increase. We offer new theoretical contributions and propose managerial implications for firms from emerging markets.