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SMEs, Intellectual Capital, and Offshoring of Service Activities: An Empirical Investigation

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Abstract

Drawing on the extant research on offshoring in international business, entrepreneurship and strategy literature, we develop a model of offshoring of service activities by small and medium-sized firms (SMEs). Using the intellectual capital perspective as a theoretical framework, we hypothesize that the unique configuration of human, social and organizational capital of SMEs will be linked to offshoring of services to international providers. Using data from 119 SMEs in three industry sectors in the US and South Korea, we empirically test the hypothesized relationships and find at least some support for our predictions. Specifically, while we found no country-specific differences in offshoring, SMEs with more social capital and less human capital are more likely to engage in offshoring of service activities. However, the relationship between human and organizational capital and offshoring of such activities is contingent on the size of the SMEs. Implications for theory and practice are discussed.

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Notes

  1. http://www.forbes.com/sites/johnhall/2013/11/03/12-challenges-faced-by-the-fastest-growing-companies/; http://www.prnewswire.com/news-releases/small-businesses-big-recruiting-challenges-survey-finding-capable-employees-is-greatest-management-hurdle-for-small-businesses-218494921.html.

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Acknowledgements

This research was in part funded by the San Diego State University Center for International Business Education and Research (CIBER).

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Authors and Affiliations

  1. Fowler College of Business, San Diego State University, San Diego, USA

    Martina Musteen & Mujtaba Ahsan

  2. School of Business, Yeungnam University, Gyongsan, South Korea

    Taekyung Park

Authors
  1. Martina Musteen
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  2. Mujtaba Ahsan
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  3. Taekyung Park
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Corresponding author

Correspondence to Mujtaba Ahsan.

Appendix: Survey Items

Appendix: Survey Items

Intellectual capital

(1 = strongly disagree, 5 = strongly agree)

Human capital (adapted from Subramaniam and Youndt 2005)

  • Our employees are highly skilled

  • Our employees are widely considered the best in our industry

  • Our employees are creative and bright

  • Our employees develop new ideas and knowledge

Social capital (adapted from Yli-Renko et al. 2002)

  • We rely extensively on personal contacts to find new business opportunities

  • We work closely with our business partners (e.g. suppliers, vendors, customers)

  • We rely on external contacts and networking in growing our business

Organizational capital (adapted from Subramaniam and Youndt 2005)

Our organization uses patents and licenses as a way to store knowledge

Much of our organization’s knowledge is contained in manuals, databases, etc.

Our organization embeds much of its knowledge and information in structures, systems, and processes

Entrepreneurial orientation (adapted from Miller 1983)

(1-strongly disagree, 5 = strongly agree)

  • Our firm shows a great deal of tolerance for high-risk projects.

  • Our firm uses only ‘tried and true’ procedures, systems, or methods.

  • Our firm rewards taking calculated risks.

  • Our firm challenges, rather than responds to its major competitors.

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Musteen, M., Ahsan, M. & Park, T. SMEs, Intellectual Capital, and Offshoring of Service Activities: An Empirical Investigation. Manag Int Rev 57, 603–630 (2017). https://doi.org/10.1007/s11575-017-0315-1

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  • DOI: https://doi.org/10.1007/s11575-017-0315-1

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