Advanced service offshore outsourcing: Exploring the determinants of capability development in emerging market firms

Research Summary : We analyze the effect of offshored service task types on the development of capabilities in emerging market service provider firms. Using multiple case studies, we find that, dependent on task interdependent service types, implying different client interactions (firm‐external determinants), organizational capabilities are developed. More specifically, reciprocal task interdependent services generate human capital and management capabilities, while sequential task interdependent services generate organizational capital and management capabilities. Moreover, we find a relationship between the capabilities, where the deficient development of one capability can be mitigated by the development of another capability (firm‐internal determinants). Grounded in organization and service production theory, the article contributes to the thematic literature on service offshoring and the literature on organizational capabilities, with a particular focus on emerging market firms. Managerial Summary : Offshore outsourcing of advanced services is contributing to the development of capabilities for client firms, but is also expected to benefit service provider firms from emerging markets. Thus, we study how offshore outsourcing of services contributes to the development of these capabilities for service provider firms. We find that the characteristics of the services, which are causing different interactions with the client, help the firm develop a variety of capabilities. These capabilities affect the management, employees, and organization of service provider firms. Although the developed competencies are not a solution for all business development challenges of emerging market firms, the implications of this study could lead to competitive advantages for the firms if fully explored and exploited.