Skip to main content
SpringerLink
Log in

The Complexity of Offshoring: A Comparative Study of Mexican Maquiladora Plants and Indian Outsourcing Offices from an Institutional-Prospect Theory Perspective

  • Chapter
  • First Online:
The Offshoring Challenge

Abstract

To improve our understanding of offshoring and how it is evolving, salient ideas from both institutional and prospect theories are utilized to build a more descriptive model of how decisions are made to (re)direct foreign investment into offshored activities. Careful examinations of the offshoring programs in India and Mexico reveal that they took different investment trajectories during the past decade that can be aptly explained by this integrative model. The primary information used to measure the population trends of offshoring firms in India and Mexico comes from proprietary data sources for each country that issue annual reports on the number of operators in their respective offshoring sectors, that is, services and manufacturing.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 129.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 169.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 169.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    In 2006, one of the authors was approached by a global Tier 1 automotive supplier about undertaking a study in Mexico to determine the feasibility of establishing an offshored design facility there. The proposal was intriguing due to the fact that this company had just announced publicly that it was halting construction of a manufacturing plant in Mexico, even though it was 90 % complete. The proposed design shop in Mexico would be a replacement for their offshored endeavor in India, which they now regretted. Recently, they had discovered a ‘Slovakian’ solution to automotive design for their European products. Slovakia was close to their plants in Europe, and it facilitated the design-production linkage at a lower cost. Now, they wanted to duplicate this experience in North America, and Mexico seemed ideal if they could find the right city.

References

  • Belderbos R, Sleuwaegen L (2005) Competitive drivers and international plant configuration strategies: a product-level test. Strateg Manag J 26(6):577–593

    Article  Google Scholar 

  • Business Week (2006) Future of outsourcing. Cover story, 30 January issue

    Google Scholar 

  • Camerer C (2000) Prospect theory in the wild: evidence from the field. In Kahneman and Tversky (eds) Choice values and frames. Cambridge University Press, Cambridge

    Google Scholar 

  • Carrillo J, Hualde A (1997) Maquiladoras de Tercera Generación: El Caso de Delphi-General Motors. Comercio Exterior 47(9):747–758

    Google Scholar 

  • Chetty S, Eriksson K, Lindbergh J (2006) The effect of specificity of experience on a firm’s perceived importance of institutional knowledge in an ongoing business. J Int Bus Stud 37:699–712

    Google Scholar 

  • Contractor FJ (2011) Global “chop shops” slice, dice and outsource the value chain. AIB Insights 11(2):13–15

    Google Scholar 

  • Dacin T, Goodstein J, Scott R (2002) Institutional theory and institutional change: introduction to the special research forum. Acad Manag J 45(1):45–57

    Article  Google Scholar 

  • Dam K (2001) The rules of the global game: a new look at US economic policymaking. The University of Chicago Press, Chicago

    Google Scholar 

  • Devers CE, Wiseman RM, Holmes RM (2007) The effects of endowment and loss aversion in managerial stock option valuation. Acad Manag J 50:91–208

    Article  Google Scholar 

  • Dikova D, van Witteloostuijn A (2007) Acquisition versus Greenfield foreign entry: diversification mode choice in central and Eastern Europe. J Int Bus Stud 38:1013–1033

    Article  Google Scholar 

  • DiMaggio PJ, Powell WW (1983) The iron cage revisited: institutional isomorphism and collective rationality in organizational fields. Am Sociol Rev 48:147–160

    Article  Google Scholar 

  • Druckman JN (2001) Using credible advice to overcome framing effects. J Law Econ Organ 17(1):62–82

    Article  Google Scholar 

  • Dunning JH (1981) The eclectic theory of international production: a case study of the international hotel industry. Manag Decis Econ 2(4):197–210

    Article  Google Scholar 

  • Fiegenbaum A, Hart S, Schendel D (1996) Strategic reference point theory. Strateg Manag J 17(3):219–235

    Article  Google Scholar 

  • George E, Chattopadhyay P, Sitkin SB, Barden JQ (2006) Cognitive underpinnings of institutional persistence and change: a framing perspective. Acad Manag Rev 31:347–365

    Article  Google Scholar 

  • Giridharadas A (2007) Outsourcing works so well, India is exporting jobs. The New York Times, 25 Sept 2007

    Google Scholar 

  • Glader P (2011) As Indian companies grow in the U.S., outsourcing comes home. The Washington Post, 20 May 2011

    Google Scholar 

  • Guler I, Guillen M, Macphersom JM (2002) Global competition, institutions, and the diffusion of organizational practices: the international spread of ISO 9000 quality certificates. Adm Sci Q 47:207–232

    Article  Google Scholar 

  • Guler I (2007) Throwing good money after bad? A multi-level study of sequential decision making in the venture capital industry. Admin Sci Quart 52:248–285

    Google Scholar 

  • Harriss J, Hunter J, Lewis CM (1995) The new institutional economics and third world development. Routledge, London

    Google Scholar 

  • Hodgkinson GP, Bown NJ, Maule AJ, Glaister KW, Pearman AD (1999) Breaking the frame: an analysis of strategic cognition and decision making under uncertainty. Strateg Manag J 20:977–985

    Article  Google Scholar 

  • Hodgkinson GP, Maule AJ, Bown NJ, Pearman AD, Glaister KW (2002) Further reflections on the elimination of framing bias in strategic decision making. Strateg Manag J 23:1069–1076

    Article  Google Scholar 

  • Holmes RM, Bromiley P, Devers CE, Holcomb TR, McGuire JB (2011) Management theory applications of prospect theory: accomplishments, challenges, and opportunities. J Manag, published online, 7 Feb 2011. http://jom.sagepub.com/content/37/4/1069

  • Johnson EJ, Hershey J, Meszaros J, Kunreuther H (1993) Framing probability distortions, and insurance decisions. J Risk Uncertainty 7:31–35

    Article  Google Scholar 

  • Kahneman D (2011) Don’t blink: the hazards of confidence. The New York Times, 19 Oct 2011

    Google Scholar 

  • Kahneman D, Tversky A (1979) Prospect theory: an analysis of decision under risk. Econometrica 47:263–291

    Article  MATH  Google Scholar 

  • Kahneman D, Tversky A (2000) Choices, values, and frames. Cambridge University Press, Cambridge

    Google Scholar 

  • Kennedy MK, Fiss PC (2009) Institutionaliztion, framing, and diffusion: the logic of TQM adoption and implementation decisions among U.S. hospitals. Acad Manag J 52(5):897–918

    Article  Google Scholar 

  • Khan M (1995) State failure in weak states: a critique of new institutionalist explanations. Routledge, London

    Google Scholar 

  • Kolenc V (2010) Maquilas rebound: growth drives industry on both sides of border. El Paso Times, 3 Oct 2010

    Google Scholar 

  • Larraza-Kintana M, Wiseman RM, Gomez-Mejia LR, Welbourne TM (2007) Disentangling compensation and employment risks using the behavioral agency model. Strateg Manag J 28:1001–1019

    Article  Google Scholar 

  • Lehner JM (2000) Shifts of reference points for framing of strategic decisions and changing risk-return associations. Manage Sci 46(1):63–76

    Article  MathSciNet  MATH  Google Scholar 

  • Liu R, Feils DJ, Scholnick B (2011) Why are different services outsourced to different countries? J Int Bus Stud 42:558–571

    Article  Google Scholar 

  • Miller VV (ed) (2007) NAFTA and the maquiladora program: rules, routines, and institutional legitimacy. Texas Western Press, El Paso (TX)

    Google Scholar 

  • Miller VV, Loess KH (2002) An institutional analysis of the U.S. foreign sales corporation. Int Bus Rev 11(6):753–763

    Article  Google Scholar 

  • Miller VV, Mukherji A (2010) Offshoring sectors: a critical comparison of Mexican maquiladora plants with Indian outsourcing offices. Adv Competitiveness Res 18(1–2):4–24

    Google Scholar 

  • Nelson RR, Winter SG (1982) An evolutionary theory of economic change. Belknap Press, Cambridge

    Google Scholar 

  • North D (1990) Institutions, institutional change and economic performance. Cambridge University Press, New York

    Book  Google Scholar 

  • Personal (2011) Information obtained from a conversation with V.V. Miller in a conversation with a TCS manager at Central Michigan University in November 2011

    Google Scholar 

  • Salter S, Sharp D (1997) Project escalation and sunk costs: A test of the international generalizability of agency and prospect theories. J Int Bus Stud 28(1):101–121

    Article  Google Scholar 

  • Santangelo GD, Meyer KE (2011) Extending the internationalization process model: increases and decreases of MNE commitment in emerging economies. J Int Bus Stud 42:894–909

    Article  Google Scholar 

  • Scott W (1995) Institutions and organizations. Sage Publications, Thousand Oaks

    Google Scholar 

  • Shimizu K (2007) Prospect theory, behavioral theory, and the threat-rigidity thesis: combinative effects on organizational decisions to divest formerly acquired units. Acad Manag J 50:1495–1514

    Article  Google Scholar 

  • Tadelis S (2007) The innovative organization: creating value through outsourcing. Calif Manage Rev 50(1):261–277

    Article  Google Scholar 

  • Tagliabue J (2007) Eastern Europe becomes a center for outsourcing. The New York Times, 19 Apr 2007

    Google Scholar 

  • Thacker S (2000) Big business, the state, and free trade: constructing coalitions in Mexico. Cambridge University Press, Cambridge

    Book  Google Scholar 

  • The Economist (2004) India country report. The economist intelligence unit, March 2004

    Google Scholar 

  • Timmons H (2011) Legal outsourcing firms creating jobs for American lawyers. The New York Times, 2 June 2011

    Google Scholar 

  • Tversky A, Kahneman D (1992) Advances in prospect theory: cumulative representation of uncertainty. J Risk Uncertainty 5:297–323

    Article  MATH  Google Scholar 

  • Weyland K (2002) The politics of market reform in fragile democracies: Argentina, Brazil, Peru, and Venezuela. Princeton University Press, Princeton

    Google Scholar 

  • Williamson O (1985) The economic institutions of capitalism. Free Press, New York

    Google Scholar 

  • Wilson PA (1992) Exports and local development: Mexico’s new maquiladoras. University of Texas Press, Austin

    Google Scholar 

  • Witt MA, Lewin AY (2007) Outward foreign direct investment as escape response to home country institutional constraints. J Int Bus Stud 38(4):579–594

    Article  Google Scholar 

  • Wright G, Goodwin P (2002) Eliminating a framing bias y using simple instructions to ‘think harder’ and respondents with managerial experience: comment on ‘breaking the frame’. Strateg Manag J 23:1059–1067

    Article  Google Scholar 

  • Wu G, Markle AB (2007) An empirical test of gain-loss separability in prospect theory. Paper presented to the Institute for Operations Research and Management Science, Seattle

    Google Scholar 

Download references

Acknowledgments

The authors wish to thank the many people who have thoughtfully commented on the ideas presented herein as they were being developed and refined through presentations in academic settings. The research assistance of Abhilash Ravishankar, Zheng Wang, and Peng Xu has been invaluable in the development of much of the data and graphics supporting these ideas. Partial funding for this research effort was provided by the U.S. Department of Education through grant P153A080011.

Author information

Authors and Affiliations

  1. Central Michigan University, 204H Smith Hall-CMU, Mount Pleasant, MI, 48859, USA

    Van V. Miller

  2. Texas A&M International University, Laredo, USA

    Ananda Mukherji

  3. East Tennessee State University, Johnson City, USA

    Kurt Loess

Authors
  1. Van V. Miller
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Ananda Mukherji
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Kurt Loess
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Van V. Miller .

Editor information

Editors and Affiliations

  1. Department of Strategic Management, Copenhagen Business School, Kilevej 14, Frederiksberg, DK-2000, Denmark

    Torben Pedersen

  2. Department of Strategic Management, Copenhagen Business School, Sachsenhausenerstr. 43, Schwalbach a. Ts., 3500, Denmark

    Lydia Bals

  3. Center for Strategic Management, Copenhagen Business School, Porcelaenshaven 24, Frederiksberg, DK-2000, Denmark

    Peter D. Ørberg Jensen

  4. Department of Strategic Management, Copenhagen Business School, Kilevej 14, Frederiksberg, DK-2000, Denmark

    Marcus M. Larsen

Rights and permissions

Reprints and permissions

Copyright information

© 2013 Springer-Verlag London

About this chapter

Cite this chapter

V. Miller, V., Mukherji, A., Loess, K. (2013). The Complexity of Offshoring: A Comparative Study of Mexican Maquiladora Plants and Indian Outsourcing Offices from an Institutional-Prospect Theory Perspective. In: Pedersen, T., Bals, L., Ørberg Jensen, P., Larsen, M. (eds) The Offshoring Challenge. Springer, London. https://doi.org/10.1007/978-1-4471-4908-8_21

Download citation

  • DOI: https://doi.org/10.1007/978-1-4471-4908-8_21

  • Published:

  • Publisher Name: Springer, London

  • Print ISBN: 978-1-4471-4907-1

  • Online ISBN: 978-1-4471-4908-8

  • eBook Packages: EngineeringEngineering (R0)

Publish with us

Policies and ethics

Search

Navigation