Research on why firms should outsource and how they should do it has proliferated in the past two decades, but few consistent findings have emerged concerning the benefits of outsourcing. We argue that this is in part due to the lack of an adequate framework for measuring the effects of outsourcing. To address this, we present such a framework based upon the Cobb–Douglas productivity function. We explain how our framework can be used to unpack one component of the Cobb–Douglas productivity function, the ‘total factor productivity’, which represents the other numerous sub-variables that affect outsourcing productivity, beyond the capital and labour expenditures. We also demonstrate the framework using a simple illustrative example.
We examine the employment effects of international outsourcing by using firm- level data from the Finnish manufacturing sector. A major advantage of our data is that outsourcing is defined based on firms’ actual use of intermediate inputs from foreign trade statistics. The estimates show that intensive outsourcing (more than two times the 2-digit industry median) does not reduce employment nor have an effect on the share of low-skilled workers.
We examine the effects of establishment- and industry-level labor market turnover on employees’ well-being. The linked employer-employee panel data contain both survey information on employees’ subjective well-being and comprehensive register-based information on job and worker flows. Labor market turbulence decreases well-being as experienced job satisfaction and satisfaction with job security are negatively related to the previous year’s flows. We test for the existence of compensating wage differentials by explaining wages and job satisfaction with average uncertainties, measured by an indicator for a high moving average of past excessive turnover (churning) rate. The results are consistent with compensating wage differentials, since high uncertainty increases real wages, but has no effect on job satisfaction.
Most people agree that extending the working life is a desirable goal. Yet, there is much to be known about the factors determining the decision to retire. In this paper, we analyze the role played by one of them: routine intensity of the occupation. We show that workers in more routine occupations tend to work less hours, but we did not find any significant effect on the decision to retire.
This study explores the potential role of adverse working conditions at the workplace in the determination of on-the-job search in the Finnish labour market. The results reveal that workers currently facing adverse working conditions have greater intentions to switch jobs and they are also more willing to stop working completely. In addition, those workers search new matches more frequently. There is evidence that adverse working conditions consistently increase the level of job dissatisfaction and, in turn, it is job dissatisfaction that drives workers’ intentions to quit and intensifies actual job search.
The paper examines the antecedents of intentions to quit, job search, and actual job switches during a five-year follow-up period. We use a representative random sample of all Finnish employees (N = 2800). The data both contain information on intentions to quit and on-the-job search from a cross-section survey and records employees’ actual job switches from longitudinal register data that can be linked to the survey. Specifically, we study the contribution of adverse working conditions (harms, hazards, uncertainty, physically and mentally heavy work), work organization (promotion prospects, discrimination, supervisor support) and ease-of-movement factors (mental health, wage level, regional unemployment). According to the estimates, adverse working conditions, poor promotions prospects, discrimination, poor supervisor support and mental health symptoms are positively related to unwillingly staying in a job, since these variables increase the probability of turnover intentions or job search but not actual job switches.
We examine the employment effects of international outsourcing by using firm- level data from the Finnish manufacturing sector. A major advantage of our data is that outsourcing is defined based on firms’ actual use of intermediate inputs from foreign trade statistics. The estimates show that intensive outsourcing (more than two times the 2-digit industry median) does not reduce employment nor have an effect on the share of low-skilled workers.
We examine the effects of establishment- and industry-level labor market turnover on employees’ well-being. The linked employer-employee panel data contain both survey information on employees’ subjective well-being and comprehensive register-based information on job and worker flows. Labor market turbulence decreases well-being as experienced job satisfaction and satisfaction with job security are negatively related to the previous year’s flows. We test for the existence of compensating wage differentials by explaining wages and job satisfaction with average uncertainties, measured by an indicator for a high moving average of past excessive turnover (churning) rate. The results are consistent with compensating wage differentials, since high uncertainty increases real wages, but has no effect on job satisfaction.
Most people agree that extending the working life is a desirable goal. Yet, there is much to be known about the factors determining the decision to retire. In this paper, we analyze the role played by one of them: routine intensity of the occupation. We show that workers in more routine occupations tend to work less hours, but we did not find any significant effect on the decision to retire.
This study explores the potential role of adverse working conditions at the workplace in the determination of on-the-job search in the Finnish labour market. The results reveal that workers currently facing adverse working conditions have greater intentions to switch jobs and they are also more willing to stop working completely. In addition, those workers search new matches more frequently. There is evidence that adverse working conditions consistently increase the level of job dissatisfaction and, in turn, it is job dissatisfaction that drives workers’ intentions to quit and intensifies actual job search.
The paper examines the antecedents of intentions to quit, job search, and actual job switches during a five-year follow-up period. We use a representative random sample of all Finnish employees (N = 2800). The data both contain information on intentions to quit and on-the-job search from a cross-section survey and records employees’ actual job switches from longitudinal register data that can be linked to the survey. Specifically, we study the contribution of adverse working conditions (harms, hazards, uncertainty, physically and mentally heavy work), work organization (promotion prospects, discrimination, supervisor support) and ease-of-movement factors (mental health, wage level, regional unemployment). According to the estimates, adverse working conditions, poor promotions prospects, discrimination, poor supervisor support and mental health symptoms are positively related to unwillingly staying in a job, since these variables increase the probability of turnover intentions or job search but not actual job switches.
New Product Development as a Complex Adaptive System of DecisionsIan McCarthy
Early research on new product development (NPD) has produced descriptive frameworks and models that view the process as a linear system with sequential and discrete stages. More recently, recursive and chaotic frameworks of NPD have been developed, both of which acknowledge that NPD progresses through a series of stages, but with overlaps, feedback loops, and resulting behaviors that resist reductionism
and linear analysis. This article extends the linear, recursive, and chaotic frameworks by viewing NPD as a complex adaptive system (CAS) governed by three levels of decision making — in-stage, review, and strategic—and the accompanying decision rules. The research develops and presents propositions that predict how the configuration and organization of NPD decision-making agents will influence
the potential for three mutually dependent CAS phenomena: nonlinearity, selforganization, and emergence. Together these phenomena underpin the potential for NPD process adaptability and congruence. To support and to verify the propositions, this study uses comparative case studies, which show that NPD process adaptability occurs and that it is dependent on the number and variety of agents, their corresponding connections and interactions, and the ordering or disordering effect of the decision levels and rules. Thus, the CAS framework developed within this article maintains a fit among descriptive stance, system behavior, and innovation type, as it considers individual NPD processes to be capable of switching or toggling between different behaviors — linear to chaotic — to produce corresponding innovation outputs that range from incremental to radical in accord with market expectations.
Organisational diversity, evolution and cladistic classificationsIan McCarthy
This article presents a case for the construction of a formal classification of manufacturing systems using cladistics, a technique from the biological school of classification. A seven-stage framework for roducing a manufacturing cladogram is presented, along with a pilot case study example. This article describes the role that classification plays in the pure and applied sciences, the social sciences and reviews the status of existing manufacturing classifications. If organisational diversity and organisational change processes are governed by evolutionary mechanisms, studies of organisations based on an evolutionary approach such as cladistics could have potential, because as March [March JG. The evolution of evolution. In: Baum JAC, Singh JV, editors. Evolutionary dynamics of organizations. Oxford University Press, 1994. p. 39±52], page 45, states ``there is natural speculation that organisations, like species can be engineered by understanding the evolutionary processes well enough to intervene and produce competitive organisational effects''. It is suggested that a cladistic study could provide organisations with a ``knowledge map'' of the ecosystem in which they exist and by using this phylogenetic and situational analysis, they could determine coherent and appropriate action for the specification of change.
Toward a Phylogenetic Reconstruction of Organizational LifeIan McCarthy
Classification is an important activity that facilitates theory development in many academic disciplines. Scholars in fields such as organizational science, management science and economics and have long recognized that classification offers an approach for ordering and understanding the diversity of organizational taxa (groups of one or more similar organizational entities). However, even the most prominent organizational classifications have limited utility, as they tend to be shaped by a specific research bias, inadequate units of analysis and a standard neoclassical economic view that does not naturally accommodate the disequilibrium dynamics of modern competition. The result is a relatively large number of individual and unconnected organizational classifications, which tend to ignore the processes of change responsible for organizational diversity. Collectively they fail to provide any sort of universal system for ordering, compiling and presenting knowledge on organizational diversity. This paper has two purposes. First, it reviews the general status of the major theoretical approaches to biological and organizational classification and compares the methods and resulting classifications derived from each approach. Definitions of key terms and a discussion on the three principal schools of biological classification (evolutionary systematics, phenetics and cladistics) are included in this review. Second, this paper aims to encourage critical thinking and debate about the use of the cladistic classification approach for inferring and representing the historical relationships underpinning organizational diversity. This involves examining the feasibility of applying the logic of common ancestry to populations of organizations. Consequently, this paper is exploratory and preparatory in style, with illustrations and assertions concerning the study and classification of organizational diversity.
The ability of current statistical classifications to separateservices and ma...Ian McCarthy
This paper explores the performance of current statistical classification systems in classifying firms and, in particular, their ability to distinguish between firms that provide services and firms that provide manufacturing. We find that a large share of firms, almost 20%, are not classified as expected based on a comparison of their statements of activities with the assigned industry codes. This result is robust to analyses on different levels of aggregation and is validated in an additional survey. It is well known from earlier literature that industry classification systems are not perfect. This paper provides a quantification of the flaws in classifications of firms. Moreover, it is explained why the classifications of firms are imprecise. The increasing complexity of production, inertia in changes to statistical systems and the increasing integration of manufacturing products and services are some of the primary and interrelated explanations for this lack of precision. We emphasise, however, that such classification problems are not resolved using a ‘technical fix’. Any statistical classification method involves a number of tradeoffs.
Achieving contextual ambidexterity in R&D organizations: a management control...Ian McCarthy
Research on how managers control R&D activities has tended to focus on the performance measurement systems used to exploit existing knowledge and capabilities. This focus has been at the expense of how broader forms of management control could be used to enable R&D contextual ambidexterity, the capacity to attain appropriate levels of exploitation and exploration behaviors in the same R&D organizational unit. In this paper, we develop a conceptual framework for understanding how different types of control system, guided by different R&D strategic goals, can be used to induce and balance both exploitation and exploration. We illustrate the elements of this framework and their relations using data from biotechnology firms, and then discuss how the framework provides a basis to empirically examine a number of important control relationships and phenomena.
When customers get clever: Managerial approaches to dealing with creative con...Ian McCarthy
Creative consumers (defined as customers who adapt, modify, or transform a proprietary offering) represent an intriguing paradox for business. On
one hand, they can signify a black hole for future revenue, with breach of copyright and intellectual property. On the other hand, they represent a gold mine of ideas and business opportunities. Central to business is the need to create and capture value, and creative consumers demand a shift in the mindsets and business models of how firms accomplish both. Based upon their attitude and action toward customer innovation, we develop a typology of firms’ stances toward creative consumers. We then consider the implications of the stances model for corporate strategy and
examine a three-step approach to dealing with creative consumers: awareness, analysis, and response.
Technology Management - A Complex Adaptive Systems ApproachIan McCarthy
There are systems methods and evolutionary processes that can help organisations understand the innovative patterns and competitive mechanisms that influence the creation, management and exploitation of technology. This paper presents a specific model based on the evolutionary processes of variation, selection, retention and struggle, coupled with fitness landscape theory. This latter concept is a complex adaptive systems theory that has attained recognition as an approach for visually mapping the strategic options an evolving system could pursue. The relevance and utility of fitness landscape theory to the strategic management of technology is explored, and a definition and model of technological fitness provided. The complex adaptive systems perspective adopted by this paper, views organisations as evolving systems that formulate strategies by classifying, selecting, adopting and exploiting various combinations of technological capabilities. A model called the strategy configuration chain is presented to illustrate this strategic process.
Why do some patents get licensed while others do not?Ian McCarthy
To understand why some patents get licensed and others do not, we estimate a portfolio of firm- and patent-level determinants for why a particular licensor’s patent was licensed over all technologically similar patents held by other licensors. Using data for licensed biopharmaceutical patents, we build a set of alternate patents that could have been licensed-in using topic modeling techniques. This provides a more sophisticated way of controlling for patent characteristics and analyzing the attractiveness of a licensor and the characteristics of the patent itself. We find that patents owned by licensors with technological prestige, experience at licensing, and combined technological depth and breadth have a greater chance at being chosen by licensees. This suggests that a licensor’s standing and organizational learning rather than the quality of its patent alone influence the success of outward licensing.
Understanding outsourcing contexts through information asymmetry and capabili...Ian McCarthy
Outsourcing is a strategic activity that has long been central to operations management research and practice. Yet, there are still many outsourcing management challenges that remain. In this article, we explore two of the outsourcing challenges that motivated this special issue and are central to the 10 articles included. To do this, we develop a theoretical model that examines how variations in capability fit and information asymmetry combine to present firms with four different outsourcing contexts. We then explain how each of the articles included in this special issue relate to our theoretical model and explore several avenues for future research.
Achieving Agility Using Cladistics: An Evolutionary AnalysisIan McCarthy
To achieve the status of an agile manufacturer, organisations need to clearly understand the concept of agility, relative to their industrial and business circumstances and to then identify and acquire the appropriate characteristics which will result in an agile manufacturing organisation. This paper is not simply another discussion on the definition of agility, or a philosophical debate on the drivers and characteristics of agility. This paper presents an evolutionary modelling technique (cladistics) which could enable organisations to systematically manage and understand the emergence of new manufacturing forms within their business environment. This fundamental, but important insight is valuable for achieving successful organisational design and change. Thus, regardless of the industrial sector, managers could use cladistics as an evolutionary analysis technique for determining ``where they have been and where they are now''. Moving from a non-agile manufacture to an agile manufacture is a process of organisational change and evolutionary development. This evolutionary method will enable organisations to understand the landscape of manufacturing possibilities that exist, to identify appropriate agile forms and to successfully navigate that landscape.
Complex adaptive system mechanisms, adaptive management practices, and firm p...Ian McCarthy
As a fascinating concept, the mechanisms of complex adaptive system (CAS) attracted many researchers from a variety of disciplines. Nevertheless, how the mechanism-related variables, such as strategic resonance, accreting nodes, pattern forming, and catalytic behavior of organization, impact the firm product innovativeness is rarely addressed empirically in the new product development (NPD) literature. Also, there exist limited studies on the antecedents of the mechanisms of CAS in the NPD literature. In this respect, we identified and operationalized the adaptive management practices, which involve bonding, nonlinear, and attractor behaviors of management, as antecedents of mechanisms and firm product innovativeness. By studying 235 firms, we found that (1) strategic resonance and accreting nodes are positively related to firm product innovativeness, (2) bonding, nonlinear, and attractor behaviors of management positively influence the mechanism variables, and (3) market and technology turbulence impact the adaptive management practices. We also found that mechanisms of CAS partially mediate the relationship between adaptive management practices and firm product innovativeness.
Innovation in manufacturing as an evolutionary complex systemIan McCarthy
The focus of this paper is on innovation in terms of the new product development processes and to discuss its main features. This is followed by a presentation of the new ideas emerging from complex systems science. It is then demonstrated how complex systems provides an overall conceptual framework for thinking about innovation and for considering how this helps to provide understanding and advice for the organisation of new product development in different circumstances. Three case studies are quoted which illustrate the application of these new ideas.
Making a face: Graphical illustrations of managerial stances toward customer ...Ian McCarthy
Creative consumers – consumers who adapt, modify or transform a proprietary offering – represent an intriguing paradox for business. On the one hand they can be a black hole for future revenue, with breach of copyright and intellectual property, while on the other hand they represent a gold mine of ideas and business opportunities. This problem is central to business – business needs to both create and capture value; the problem is that creative consumers demand a shift in the mindsets and business models of how firms both create and capture value. We develop a typology of firms’ stances to creative consumers based upon their attitude and action towards customer innovation. We then consider the implications of the stances model for corporate strategy, and examine a three-step approach to dealing with creative consumers, namely, awareness, analysis and response.
Unpacking the Social Media Phenomenon: Towards a Research AgendaIan McCarthy
In this paper, we highlight some of the challenges and opportunities that social media presents to researchers, and offer relevant theoretical avenues to be explored. To do this, we present a model that unpacks social media by using a honeycomb of seven functional building blocks. We then examine each of the seven building blocks and, through appropriate social and socio-technical theories, raise questions that warrant further in-depth research to advance the conceptualization of social media in public affairs research. Finally, we combine the individual research questions for each building block back into the honeycomb model to illustrate how the theories in combination provide a powerful macro-lens for research on social media dynamics.
Game on: Engaging customers and employees through gamificationIan McCarthy
Managers are frequently tasked with increasing the engagement levels of key stakeholders, such as customers and employees. Gamification - defined as the application of game design principles to change behavior in non-gaming contexts - is a tool that, if crafted and implemented properly, can increase engagement. In this article we discuss how gamification can aid customer and employee engagement, and delineate between four different types of customers and employees who act as ‘players’ in gamified experiences. We include illustrative examples of gamification and conclude by presenting five lessons for managers who wish to utilize gamification.
Two related trends characterize the recent past: value propositions are migrating from the physical to the informational, and value creation is shifting from firms to consumers. These two trends meet in the phenomenon of “consumer-generated intellectual property” (CGIP). This article addresses the question: “How should firms manage the intellectual property that their customers create?” It explores how CGIP presents important dilemmas for managers and argues that consumers’ “intellectual property” should not be leveraged at the expense of their “emotional property.” It integrates these perspectives into a diagnostic framework and discusses eight strategies for firms to manage CGIP. (Keywords: Consumer Behavior, Intellectual Property, Innovation Management, New Product Management, Competitive Advantage, Consumers, Product Design)
An Integrated Approach to Studying Multiplexity in Entrepreneurial NetworksIan McCarthy
Multiplexity occurs in entrepreneurial networks when flows interact within and across relationships. It defines how these networks function and evolve and cannot be examined by studying network structure or flows separately. Despite the growing recognition of the importance of multiplexity, related research has remained limited and lacks an integrated approach to simultaneously examine structure and flows, thus restricting our understanding of entrepreneurial networks. We propose an integrated approach for conducting inductive studies into multiplexity, involving an adaptation of the “business networks” conceptual model, the configuration theory perspective, and the Q-analysis method.
Product recovery decisions within the context of Extended Producer Responsibi...Ian McCarthy
Environmental and economic evidence is increasingly supporting the need for better analytical tools for evaluating the recovery of consumer products. In response, we present a novel mathematical model for determining what we call the Optimal Recovery Plan (ORP) for any given product. The ORP is based on an evaluation and optimization of the economics of remanufacturing consumer products versus demanufacturing in the context of Extended Producer Responsibility (EPR) legislation, a driving force behind the adoption remanufacturing initiatives by firms. We provide an illustrative application of the model and then discuss its implications for scholars and practitioners concerned with sustainable business development.
Quality issues in outsourcing to China: Is it still a sustainable competitive...Ian McCarthy
Globalisation has made outsourcing to low-cost countries fashionable but firms face several challenges that fade outsourcing fashion.To survive in this outsourcing wave adopting proper sustainable strategy is needed.Using four case studies and four competitive strategies (‘‘Generic Strategies’’,‘‘Sandcone’’,‘‘Core Competences’’and ‘‘Value-Chain Analysis’’),this paper proposes sustainable
competitive advantage framework to over come quality issues in outsourcing to China.
Yasser Al Mimar - Etisalat and IT OutsourcingYasser Al Mimar
As industries become competitive, firms and organizations have been using their core competencies to gain competitive advantage. Outsourcing has become one of the strategies adopted by businesses to manage their Information systems. In the same time using blue ocean strategy to create uncontested market space and make the competition irrelevant is considered a magic framework for company's growth and success.
New Product Development as a Complex Adaptive System of DecisionsIan McCarthy
Early research on new product development (NPD) has produced descriptive frameworks and models that view the process as a linear system with sequential and discrete stages. More recently, recursive and chaotic frameworks of NPD have been developed, both of which acknowledge that NPD progresses through a series of stages, but with overlaps, feedback loops, and resulting behaviors that resist reductionism
and linear analysis. This article extends the linear, recursive, and chaotic frameworks by viewing NPD as a complex adaptive system (CAS) governed by three levels of decision making — in-stage, review, and strategic—and the accompanying decision rules. The research develops and presents propositions that predict how the configuration and organization of NPD decision-making agents will influence
the potential for three mutually dependent CAS phenomena: nonlinearity, selforganization, and emergence. Together these phenomena underpin the potential for NPD process adaptability and congruence. To support and to verify the propositions, this study uses comparative case studies, which show that NPD process adaptability occurs and that it is dependent on the number and variety of agents, their corresponding connections and interactions, and the ordering or disordering effect of the decision levels and rules. Thus, the CAS framework developed within this article maintains a fit among descriptive stance, system behavior, and innovation type, as it considers individual NPD processes to be capable of switching or toggling between different behaviors — linear to chaotic — to produce corresponding innovation outputs that range from incremental to radical in accord with market expectations.
Organisational diversity, evolution and cladistic classificationsIan McCarthy
This article presents a case for the construction of a formal classification of manufacturing systems using cladistics, a technique from the biological school of classification. A seven-stage framework for roducing a manufacturing cladogram is presented, along with a pilot case study example. This article describes the role that classification plays in the pure and applied sciences, the social sciences and reviews the status of existing manufacturing classifications. If organisational diversity and organisational change processes are governed by evolutionary mechanisms, studies of organisations based on an evolutionary approach such as cladistics could have potential, because as March [March JG. The evolution of evolution. In: Baum JAC, Singh JV, editors. Evolutionary dynamics of organizations. Oxford University Press, 1994. p. 39±52], page 45, states ``there is natural speculation that organisations, like species can be engineered by understanding the evolutionary processes well enough to intervene and produce competitive organisational effects''. It is suggested that a cladistic study could provide organisations with a ``knowledge map'' of the ecosystem in which they exist and by using this phylogenetic and situational analysis, they could determine coherent and appropriate action for the specification of change.
Toward a Phylogenetic Reconstruction of Organizational LifeIan McCarthy
Classification is an important activity that facilitates theory development in many academic disciplines. Scholars in fields such as organizational science, management science and economics and have long recognized that classification offers an approach for ordering and understanding the diversity of organizational taxa (groups of one or more similar organizational entities). However, even the most prominent organizational classifications have limited utility, as they tend to be shaped by a specific research bias, inadequate units of analysis and a standard neoclassical economic view that does not naturally accommodate the disequilibrium dynamics of modern competition. The result is a relatively large number of individual and unconnected organizational classifications, which tend to ignore the processes of change responsible for organizational diversity. Collectively they fail to provide any sort of universal system for ordering, compiling and presenting knowledge on organizational diversity. This paper has two purposes. First, it reviews the general status of the major theoretical approaches to biological and organizational classification and compares the methods and resulting classifications derived from each approach. Definitions of key terms and a discussion on the three principal schools of biological classification (evolutionary systematics, phenetics and cladistics) are included in this review. Second, this paper aims to encourage critical thinking and debate about the use of the cladistic classification approach for inferring and representing the historical relationships underpinning organizational diversity. This involves examining the feasibility of applying the logic of common ancestry to populations of organizations. Consequently, this paper is exploratory and preparatory in style, with illustrations and assertions concerning the study and classification of organizational diversity.
The ability of current statistical classifications to separateservices and ma...Ian McCarthy
This paper explores the performance of current statistical classification systems in classifying firms and, in particular, their ability to distinguish between firms that provide services and firms that provide manufacturing. We find that a large share of firms, almost 20%, are not classified as expected based on a comparison of their statements of activities with the assigned industry codes. This result is robust to analyses on different levels of aggregation and is validated in an additional survey. It is well known from earlier literature that industry classification systems are not perfect. This paper provides a quantification of the flaws in classifications of firms. Moreover, it is explained why the classifications of firms are imprecise. The increasing complexity of production, inertia in changes to statistical systems and the increasing integration of manufacturing products and services are some of the primary and interrelated explanations for this lack of precision. We emphasise, however, that such classification problems are not resolved using a ‘technical fix’. Any statistical classification method involves a number of tradeoffs.
Achieving contextual ambidexterity in R&D organizations: a management control...Ian McCarthy
Research on how managers control R&D activities has tended to focus on the performance measurement systems used to exploit existing knowledge and capabilities. This focus has been at the expense of how broader forms of management control could be used to enable R&D contextual ambidexterity, the capacity to attain appropriate levels of exploitation and exploration behaviors in the same R&D organizational unit. In this paper, we develop a conceptual framework for understanding how different types of control system, guided by different R&D strategic goals, can be used to induce and balance both exploitation and exploration. We illustrate the elements of this framework and their relations using data from biotechnology firms, and then discuss how the framework provides a basis to empirically examine a number of important control relationships and phenomena.
When customers get clever: Managerial approaches to dealing with creative con...Ian McCarthy
Creative consumers (defined as customers who adapt, modify, or transform a proprietary offering) represent an intriguing paradox for business. On
one hand, they can signify a black hole for future revenue, with breach of copyright and intellectual property. On the other hand, they represent a gold mine of ideas and business opportunities. Central to business is the need to create and capture value, and creative consumers demand a shift in the mindsets and business models of how firms accomplish both. Based upon their attitude and action toward customer innovation, we develop a typology of firms’ stances toward creative consumers. We then consider the implications of the stances model for corporate strategy and
examine a three-step approach to dealing with creative consumers: awareness, analysis, and response.
Technology Management - A Complex Adaptive Systems ApproachIan McCarthy
There are systems methods and evolutionary processes that can help organisations understand the innovative patterns and competitive mechanisms that influence the creation, management and exploitation of technology. This paper presents a specific model based on the evolutionary processes of variation, selection, retention and struggle, coupled with fitness landscape theory. This latter concept is a complex adaptive systems theory that has attained recognition as an approach for visually mapping the strategic options an evolving system could pursue. The relevance and utility of fitness landscape theory to the strategic management of technology is explored, and a definition and model of technological fitness provided. The complex adaptive systems perspective adopted by this paper, views organisations as evolving systems that formulate strategies by classifying, selecting, adopting and exploiting various combinations of technological capabilities. A model called the strategy configuration chain is presented to illustrate this strategic process.
Why do some patents get licensed while others do not?Ian McCarthy
To understand why some patents get licensed and others do not, we estimate a portfolio of firm- and patent-level determinants for why a particular licensor’s patent was licensed over all technologically similar patents held by other licensors. Using data for licensed biopharmaceutical patents, we build a set of alternate patents that could have been licensed-in using topic modeling techniques. This provides a more sophisticated way of controlling for patent characteristics and analyzing the attractiveness of a licensor and the characteristics of the patent itself. We find that patents owned by licensors with technological prestige, experience at licensing, and combined technological depth and breadth have a greater chance at being chosen by licensees. This suggests that a licensor’s standing and organizational learning rather than the quality of its patent alone influence the success of outward licensing.
Understanding outsourcing contexts through information asymmetry and capabili...Ian McCarthy
Outsourcing is a strategic activity that has long been central to operations management research and practice. Yet, there are still many outsourcing management challenges that remain. In this article, we explore two of the outsourcing challenges that motivated this special issue and are central to the 10 articles included. To do this, we develop a theoretical model that examines how variations in capability fit and information asymmetry combine to present firms with four different outsourcing contexts. We then explain how each of the articles included in this special issue relate to our theoretical model and explore several avenues for future research.
Achieving Agility Using Cladistics: An Evolutionary AnalysisIan McCarthy
To achieve the status of an agile manufacturer, organisations need to clearly understand the concept of agility, relative to their industrial and business circumstances and to then identify and acquire the appropriate characteristics which will result in an agile manufacturing organisation. This paper is not simply another discussion on the definition of agility, or a philosophical debate on the drivers and characteristics of agility. This paper presents an evolutionary modelling technique (cladistics) which could enable organisations to systematically manage and understand the emergence of new manufacturing forms within their business environment. This fundamental, but important insight is valuable for achieving successful organisational design and change. Thus, regardless of the industrial sector, managers could use cladistics as an evolutionary analysis technique for determining ``where they have been and where they are now''. Moving from a non-agile manufacture to an agile manufacture is a process of organisational change and evolutionary development. This evolutionary method will enable organisations to understand the landscape of manufacturing possibilities that exist, to identify appropriate agile forms and to successfully navigate that landscape.
Complex adaptive system mechanisms, adaptive management practices, and firm p...Ian McCarthy
As a fascinating concept, the mechanisms of complex adaptive system (CAS) attracted many researchers from a variety of disciplines. Nevertheless, how the mechanism-related variables, such as strategic resonance, accreting nodes, pattern forming, and catalytic behavior of organization, impact the firm product innovativeness is rarely addressed empirically in the new product development (NPD) literature. Also, there exist limited studies on the antecedents of the mechanisms of CAS in the NPD literature. In this respect, we identified and operationalized the adaptive management practices, which involve bonding, nonlinear, and attractor behaviors of management, as antecedents of mechanisms and firm product innovativeness. By studying 235 firms, we found that (1) strategic resonance and accreting nodes are positively related to firm product innovativeness, (2) bonding, nonlinear, and attractor behaviors of management positively influence the mechanism variables, and (3) market and technology turbulence impact the adaptive management practices. We also found that mechanisms of CAS partially mediate the relationship between adaptive management practices and firm product innovativeness.
Innovation in manufacturing as an evolutionary complex systemIan McCarthy
The focus of this paper is on innovation in terms of the new product development processes and to discuss its main features. This is followed by a presentation of the new ideas emerging from complex systems science. It is then demonstrated how complex systems provides an overall conceptual framework for thinking about innovation and for considering how this helps to provide understanding and advice for the organisation of new product development in different circumstances. Three case studies are quoted which illustrate the application of these new ideas.
Making a face: Graphical illustrations of managerial stances toward customer ...Ian McCarthy
Creative consumers – consumers who adapt, modify or transform a proprietary offering – represent an intriguing paradox for business. On the one hand they can be a black hole for future revenue, with breach of copyright and intellectual property, while on the other hand they represent a gold mine of ideas and business opportunities. This problem is central to business – business needs to both create and capture value; the problem is that creative consumers demand a shift in the mindsets and business models of how firms both create and capture value. We develop a typology of firms’ stances to creative consumers based upon their attitude and action towards customer innovation. We then consider the implications of the stances model for corporate strategy, and examine a three-step approach to dealing with creative consumers, namely, awareness, analysis and response.
Unpacking the Social Media Phenomenon: Towards a Research AgendaIan McCarthy
In this paper, we highlight some of the challenges and opportunities that social media presents to researchers, and offer relevant theoretical avenues to be explored. To do this, we present a model that unpacks social media by using a honeycomb of seven functional building blocks. We then examine each of the seven building blocks and, through appropriate social and socio-technical theories, raise questions that warrant further in-depth research to advance the conceptualization of social media in public affairs research. Finally, we combine the individual research questions for each building block back into the honeycomb model to illustrate how the theories in combination provide a powerful macro-lens for research on social media dynamics.
Game on: Engaging customers and employees through gamificationIan McCarthy
Managers are frequently tasked with increasing the engagement levels of key stakeholders, such as customers and employees. Gamification - defined as the application of game design principles to change behavior in non-gaming contexts - is a tool that, if crafted and implemented properly, can increase engagement. In this article we discuss how gamification can aid customer and employee engagement, and delineate between four different types of customers and employees who act as ‘players’ in gamified experiences. We include illustrative examples of gamification and conclude by presenting five lessons for managers who wish to utilize gamification.
Two related trends characterize the recent past: value propositions are migrating from the physical to the informational, and value creation is shifting from firms to consumers. These two trends meet in the phenomenon of “consumer-generated intellectual property” (CGIP). This article addresses the question: “How should firms manage the intellectual property that their customers create?” It explores how CGIP presents important dilemmas for managers and argues that consumers’ “intellectual property” should not be leveraged at the expense of their “emotional property.” It integrates these perspectives into a diagnostic framework and discusses eight strategies for firms to manage CGIP. (Keywords: Consumer Behavior, Intellectual Property, Innovation Management, New Product Management, Competitive Advantage, Consumers, Product Design)
An Integrated Approach to Studying Multiplexity in Entrepreneurial NetworksIan McCarthy
Multiplexity occurs in entrepreneurial networks when flows interact within and across relationships. It defines how these networks function and evolve and cannot be examined by studying network structure or flows separately. Despite the growing recognition of the importance of multiplexity, related research has remained limited and lacks an integrated approach to simultaneously examine structure and flows, thus restricting our understanding of entrepreneurial networks. We propose an integrated approach for conducting inductive studies into multiplexity, involving an adaptation of the “business networks” conceptual model, the configuration theory perspective, and the Q-analysis method.
Product recovery decisions within the context of Extended Producer Responsibi...Ian McCarthy
Environmental and economic evidence is increasingly supporting the need for better analytical tools for evaluating the recovery of consumer products. In response, we present a novel mathematical model for determining what we call the Optimal Recovery Plan (ORP) for any given product. The ORP is based on an evaluation and optimization of the economics of remanufacturing consumer products versus demanufacturing in the context of Extended Producer Responsibility (EPR) legislation, a driving force behind the adoption remanufacturing initiatives by firms. We provide an illustrative application of the model and then discuss its implications for scholars and practitioners concerned with sustainable business development.
Quality issues in outsourcing to China: Is it still a sustainable competitive...Ian McCarthy
Globalisation has made outsourcing to low-cost countries fashionable but firms face several challenges that fade outsourcing fashion.To survive in this outsourcing wave adopting proper sustainable strategy is needed.Using four case studies and four competitive strategies (‘‘Generic Strategies’’,‘‘Sandcone’’,‘‘Core Competences’’and ‘‘Value-Chain Analysis’’),this paper proposes sustainable
competitive advantage framework to over come quality issues in outsourcing to China.
Yasser Al Mimar - Etisalat and IT OutsourcingYasser Al Mimar
As industries become competitive, firms and organizations have been using their core competencies to gain competitive advantage. Outsourcing has become one of the strategies adopted by businesses to manage their Information systems. In the same time using blue ocean strategy to create uncontested market space and make the competition irrelevant is considered a magic framework for company's growth and success.
The impact of outsourcing on the transaction costs and boundaries of manufact...Ian McCarthy
This paper discusses the concept of outsourcing, along with an account of the economic benefits that are achieved by reconfiguring the organization and reducing the transaction costs of providing products and services. With the practice of outsourcing experiencing exceptional growth, this paper examines the corresponding change (decline) in UK manufacturing as an economic activity, and considers how the economic benefits of outsourcing alter the contribution that an organization makes to a sector’s gross domestic product. To assess this issue, an input–output methodology for measuring economic restructuring in UK manufacturing is presented.
Economic analysis of lead time using value stream mapping (vsm) in company o...Jéssica M. Miloco
Artigo de conclusão de curso!
Embora o presente estudo esteja limitado a uma análise do fluxo do valor de uma empresa específica do ramo de bens de capital de Sorocaba, constatou-se que a ferramenta VSM pode ser aplicada de forma diferenciada nos diversos níveis das organizações, auxiliando inclusive na tomada de decisões estratégicas.
Rapid Improvements with No Commercial Production: How do the Improvements Occ...Jeffrey Funk
This paper empirically examines 13 technologies in which significant cost and performance improvements occurred even while no commercial production occurred. Since the literature emphasizes cost reductions through increases in cumulative production, this paper explores cost and performance improvements from a new perspective. The results demonstrate that learning in these pre-commercial production cases arises through mechanisms utilized in deliberate R&D efforts. We identity three mechanisms - materials creation, process changes, and reductions in feature scale – that enable these improvements to occur and use them to extend models of learning and invention. These mechanisms can also apply during post commercial time periods and further research is needed to quantify the relative contributions of these three mechanisms and those of production-based learning in a variety of technologies.
Assembly Disruptions – Empirical Evidence in the Manufacturing Industry of Ge...IRJESJOURNAL
ABSTRACT: In this paper, we present the results of an empirical study in the manufacturing industry of Germany, Austria and Switzerland with over 100 participants, mainly from the mechanical engineering, automotive and machine tool businesses. The questionnaire-based study yielded original findings in the area of assembly disruptions and the management thereof. Major results include that assembly disruptions are widespread in the industry and lead to extensive economic damages. The reasons, durations and locations of assembly disruptions as well as their character are explored and the need for a new concept of efficient, preventive assembly disruption management is derived.
Tutkimuksessa tarkastellaan ammattirakenteiden polarisaatiota sekä yrityksissä että yritysrakenteiden muutoksen välityksellä. Aineistona käytetään Suomen yritys-työntekijäaineistoja, jotka ulottuvat pitkälle aikavälille ja kattavat suuren osan yrityksistä. Ammattirakenteiden polarisaatio on jatkunut Suomessa jo vuosikymmeniä. Keskitason tuotantotehtäviä ja toimistotehtäviä sisältävien ammattien osuus on pienentynyt. Samaan aikaan matalan osaamistason palveluammattien ja korkean osaamistason erityisasiantuntija-ammattien osuus on puolestaan ollut kasvussa. Kehityskulut ovat tapahtuneet osin jatkavien yritysten sisällä, mutta osin myös yritysten välillä tapahtuneiden rakennemuutosten kautta. Osa polarisaatiosta johtuu siitä, että kasvavien yritysten ammattirakenteet poikkeavat pienentyvien yritysten ammattirakenteista sekä siitä, että uusien yritysten ammattirakenteet poikkeavat poistuvien yritysten rakenteista. Palveluammattien osuutta on kasvattanut se, että uusissa yrityksissä palveluammattien osuus on ollut suuri ja poistuvissa yrityksissä pieni. Toisaalta palveluammattien osuus on kasvanut myös jatkavissa yrityksissä. Erilaisia keskitason rutiinitehtäviä on kadonnut sekä yritysten sisällä että yritysten vaihtuvuuden kautta. Sen sijaan korkean osaamistason ammattien osuuden kasvu selittyy ennen kaikkea yrityksien sisällä tapahtuneiden muutosten kautta. Jatkavissa yrityksissä tapahtunut ammattirakenteiden muutos on kytkeytynyt sekä tavaroiden ja palveluiden ulkomaankauppaan että tehtävien ulkoistamiseen maasta. Paljon T&K:hon panostavat ja ICT:tä käyttävät yritykset vähentävät tuotantotyöntekijöitä.
Crosscheck: Intergation Methods, Supply Chain Management and the Boeing 787 D...Herbert Ferguson-Augustus
As a part of Communication course at the University of Minnesota, Herbert B. Ferguson-Augustus researched the supply chain management practices at the Boeing Company during the 787 Dreamliner Program. Research focuses on how Boeing integrated its Tier I suppliers into the design and production processes. Research findings are discussed here.
Influence of Human Factors on the Relationship between AMT Adoption and Organ...paperpublications3
Abstract: the study used the contingency theory to study the effects of human factors on the relationship between Advanced Manufacturing Technology (AMT) adoption and organization structure. When empirically tested, the research findings present the interrelationships among the main effects (AMT index and human factors) and the interactions (AMT index*human factor index). The study revealed that there is a linear dependence of organizational index from the interaction index. This implies that changes in human factors positively and significantly affect AMT adoption and organizational structure relationship. The study confirms that it is essential for a company to match their technology investment and its integration with its human factors in order to achieve the intended manufacturing performance. The degree of fit between AMT index and organizational index was found to increase as human index increased. The findings of this study reiterate the importance and the need for proactive planning to facilitate changes in the organizational structure.
This paper explores the effects of outsourcing on employee well-being through the use of the Finnish linked employer-employee data. The direct negative effect of outsourcing is attributable to greater job destruction and worker outflow. In terms of perceived well-being, the winners in international outsourcing are those who are capable of performing interactive tasks (i.e., managers, professionals and experts), especially when offshoring involves closer connections to other developed countries.
The open academic: Why and how business academics should use social media to ...Ian McCarthy
Abstract: The mission of many business schools and their researchers is to produce research that that impacts how business leaders, entrepreneurs, managers, and innovators, think and act. However, this mission remains an elusive ideal for many business school academics because they struggle to design and produce research capable of overcoming the "research-practice gap." To help those scholars address this gap, we explain why and how they should use social media to be more 'open' to connecting with, learning from, and working with academics and other stakeholders outside of their field. We describe how social media can be used as a boundary-spanning technology to help bridge the research-practice gap. To do this, we present a process model of five research activities: networking, framing, investigating, dissemination, and assessment. Using recently published research as an illustrative example, we describe how social media was used to make each activity more open. We conclude with a framework of different social media-enabled open academic approaches (connector, observer, promoter, and influencer) and some dos and don'ts for engaging in each approach. This paper aims to help business academics rethink and change their practices so that our profession is more widely regarded for how its research positively impacts practice and societal well-being more generally.
Big Data for Creating and Capturing Value in the Digitalized Environment: Unp...Ian McCarthy
Despite significant academic and managerial interest in big data, there is a dearth of research on how big data impacts
the long-term firm performance. Reasons for this gap include a lack of objective indices to measure big data
availability and its impact, and the tendency of studies to ignore the costs associated with collecting and analyzing
big data, assuming that big data automatically delivers benefits to firms. Focusing on how firms create and capture
value from big data about customers, we use the resource-based view and three dimensions of big data (i.e., volume,
variety, and veracity) to understand when the benefits outweigh the costs. Relying on the number of downloads of
mobile device applications, we find that volume of big data has a negative effect on firm performance. This result
suggests that the “bigness” of big data alone does not ensure value creation for a firm, and could even constitute a
“dark side” of big data. Because big data variety—measured as the number of types of information taken per each
application—moderates the negative effects of big data volume, simultaneous high values of volume and variety
allow firms to create value that positively affects their performance. In addition, high levels of veracity (i.e., a high
percentage of employees devoted to big data analysis), are linked to firms benefiting from big data via value capture.
These findings shed light on the circumstances in which big data can be beneficial for firms, contributing to a better
theoretical understanding of the opportunities and challenges and providing useful indications to managers.
Standardization in a Digital and Global World: State-of-the-Art and Future Pe...Ian McCarthy
We discuss how the standards emerge from an interaction between three main sources, the standards standard-setting organizations (SSOs), the competitive market forces, and the government. We present a framework (see Table I) that highlights how these sources differ and work together to shape the standardization in a digital and global context. Also, using this framework, we introduce the contribution of each article of this issue and their contribution to some of the major issues that the standardization is facing today in a digital and global world. We conclude with the suggestions of avenues for future research on this topic.
Open branding: Managing the unauthorized use of brand-related intellectual pr...Ian McCarthy
Consumers often innovate with brand-related intellectual property (IP) without permission. Although firms often respond by exercising their legal right to stop such activity, there are a variety of situations in which consumers’ unauthorized use of brand-related IP can be desirable for a brand or in which enforcing IP rights can adversely affect a brand. This article illustrates situations in which managers may benefit from choosing to forgo exercising their IP rights. To assist managers, this article contributes a framework for understanding the managerial approaches to situations in which consumers use IP without permission.
Does getting along matter? Tourist-tourist rapport in guided group activitiesIan McCarthy
Guided group activities, where tourists consume with other tourists, are common and important. Although the
tourism and services literature suggests customer-employee rapport impacts customer satisfaction, the composition
and impact of tourist-tourist rapport in guided group activities have received minimal attention. We use a
three-study mixed method approach to conceptualize and examine tourist-tourist rapport in guided group activities.
Study 1 identifies two recognized dyadic dimensions of tourist-tourist rapport (enjoyable interaction and
personal connection) and two new group-based dimensions (group attentiveness and service congruity). Study 2
(video experiment) and Study 3 (field experiment) find that enjoyable interaction and personal connection
mediate the relationship between group attentiveness and service congruity with satisfaction. Thus, touristtourist
rapport in a group context is more multidimensional and complex than previously conceptualized for
customer-employee rapport and non-group contexts. Further, we find tourist-tourist rapport is a critical service
factor such that high levels satisfy, while low levels dissatisfy.
Social media? It's serious! Understanding the dark side of social mediaIan McCarthy
Research and practice have mostly focused on the “bright side” of social media, aiming to understand and help in leveraging the manifold opportunities afforded by this technology. However, it is increasingly observable that social media present enormous risks for individuals, communities, firms, and even for society as a whole. Examples for this “dark side” of social media include cyberbullying, addictive use, trolling, online witch hunts, fake news, and privacy abuse. In this article, we aim to illustrate the multidimensionality of the dark side of social media and describe the related various undesirable outcomes. To do this, we adapt the established social media honeycomb framework to explain the dark side implications of each of the seven functional building blocks: conversations, sharing, presence, relationships, reputation, groups, and identity. On the basis of these reflections, we present a number of avenues for future research, so as to facilitate a better understanding and use of social media.
Leveraging social capital in university-industry knowledge transfer strategie...Ian McCarthy
University-industry partnerships emphasise the transformation of knowledge into products and processes which can be commercially exploited. This paper presents a framework for understanding how social capital in university-industry partnerships affect knowledge transfer strategies, which impacts on collaborative innovation developments. University-industry partnerships in three different countries, all from regions at varying stages of development, are compared using the proposed framework. These include a developed region (Canada), a transition region (Malta), and a developing region (South Africa). Structural, relational and cognitive social capital dimensions are mapped against the knowledge transfer strategy that the university-industry partnership employed: leveraging existing knowledge or appropriating new knowledge. Exploring the comparative presence of social capital in knowledge transfer strategies assists in better understanding how university-industry partnerships can position themselves to facilitate innovation. The paper proposes a link between social capital and knowledge transfer strategy by illustrating how it impacts the competitive positioning of the university-industry partners involved.
Do your employees think your slogan is “fake news?” A framework for understan...Ian McCarthy
Purpose – This article explores how employees can perceive and be impacted by the fakeness of their company slogans.
Design/methodology/approach – This conceptual study draws on the established literature on company slogans, employee audiences, and fake news to create a framework through which to understand fake company slogans.
Findings – Employees attend to two important dimensions of slogans: whether they accurately reflect a company’s (1) values and (2) value proposition. These dimensions combine to form a typology of four ways in which employees can perceive their company’s slogans: namely, authentic, narcissistic, foreign, or corrupt.
Research limitations/implications – This paper outlines how the typology provides a theoretical basis for more refined empirical research on how company slogans influence a key stakeholder: their employees. Future research could test the arguments about how certain characteristics of slogans are more or less likely to cause employees to conclude that slogans are fake news. Those conclusions will, in turn, have implications for the
morale and engagement of employees. The ideas herein can also enable a more comprehensive assessment of the impact of slogans.
Practical implications – Employees can view three types of slogans as fake news (narcissistic, foreign, and corrupt slogans). This paper identifies the implications of each type and explains how companies can go about developing authentic slogans.
Originality/value – This paper explores the impact of slogan fakeness on employees: an important audience that has been neglected by studies to
date. Thus, the insights and implications specific to this internal stakeholder are novel.
Making sense of text: artificial intelligence-enabled content analysisIan McCarthy
Purpose – The purpose of this paper is to introduce, apply and compare how artificial intelligence (AI), and specifically the IBM Watson system, can be used for content analysis in marketing research relative to manual and computer-aided (non-AI) approaches to content analysis.
Design/methodology/approach – To illustrate the use of AI enabled content analysis, this paper examines the text of leadership speeches, content related to organizational brand. The process and results of using AI are compared to manual and computer-aided approaches by using three performance factors for content analysis: reliability, validity and efficiency.
Findings – Relative to manual and computer-aided approaches, AI-enabled content analysis provides clear advantages with high reliability, high validity and moderate efficiency.
Research limitations/implications – This paper offers three contributions. First, it highlights the continued importance of the content analysis research method, particularly with the explosive growth of natural language-based user-generated content. Second, it provides a road map of how to use AI-enabled content analysis. Third, it applies and compares AI-enabled content analysis to manual and computer-aided, using leadership speeches.
Practical implications – For each of the three approaches, nine steps are outlined and described to allow for replicability of this study. The advantages and disadvantages of using AI for content analysis are discussed. Together these are intended to motivate and guide researchers to apply and develop AI-enabled content analysis for research in marketing and other disciplines.
Originality/value – To the best of the authors’ knowledge, this paper is among the first to introduce, apply and compare how AI can be used for content analysis.
Confronting indifference toward truth: Dealing with workplace bullshitIan McCarthy
Abstract Many organizations are drowning in a flood of corporate bullshit, and this is particularly true of organizations in trouble, whose managers tend to make up stuff on the fly and with little regard for future consequences. Bullshitting and lying are not synonymous. While the liar knows the truth and wittingly bends it to suit their purpose, the bullshitter simply does not care about the truth. Managers can actually do something about organizational bullshit, and this Executive Digest provides a sequential framework that enables them to do so. They can comprehend it, they can recognize it for what it is, they can act against it, and they can take steps to prevent it from happening in the future. While it is unlikely that any organization will ever be able to rid itself of bullshit entirely, this article argues that by taking these steps, astute managers can work toward stemming its flood.
The Promise of Digitalization: Unpacking the Effects of Big Data Volume, Vari...Ian McCarthy
Despite significant academic and managerial interest in big data, there is a dearth of research on how big data impacts long-term firm performance. Reasons for this gap include a lack of objective indices to measure big data availability and its impact, and the tendency of studies to ignore the costs associated with collecting and analyzing big data, assuming that big data automatically delivers benefits to firms. Focusing on how firms create and capture value from big data about customers, we use the resource-based view (RBV) and three dimensions of big data (i.e., volume, variety and veracity) to understand when the benefits outweigh the costs. Relying on the number of downloads of mobile device applications, we find that volume of big data has a negative effect on firm performance. This result suggests that the ‘bigness’ of big data alone does not ensure value creation for a firm, and could even constitute a ‘dark side’ of big data. Because big data variety – measured as the number of types of information taken per each application – moderates the negative effects of big data volume, simultaneous high values of volume and variety allow firms to create value that positively affects their performance. In addition, high levels of veracity (i.e., a high percentage of employees devoted to big data analysis), are linked to firms benefiting from big data via value capture. These findings shed light on the circumstances in which big data can be beneficial for firms, contributing to a better theoretical understanding of the opportunities and challenges and providing useful indications to managers.
Masterclass: Confronting indifference to truthIan McCarthy
Many organizations are drowning in a flood of corporate bullshit, and this is particularly true of organizations in trouble, whose managers tend to make up stuff on the fly and with little regard for future consequences. Bullshitting and lying are not synonymous. While the liar knows the truth and wittingly bends it to suit their purpose, the bullshitter simply does not care about the truth. Managers can actually do something about organizational bullshit, and this Executive Digest provides a sequential framework that enables them to do so. They can comprehend it, they can recognize it for what it is, they can act against it, and they can take steps to prevent it from happening in the future. While it is unlikely that any organization will ever be able to rid itself of bullshit entirely, this article argues that by taking these steps, astute managers can work toward stemming its flood.
Confronting indifference toward truth: Dealing with workplace bullshitIan McCarthy
Many organizations are drowning in a flood of corporate bullshit, and this is particularly true of organizations in trouble, whose managers tend to make up stuff on the fly and with little regard for future consequences. Bullshitting and lying are not synonymous. While the liar knows the truth and wittingly bends it to suit their purpose, the bullshitter simply does not care about the truth. Managers can actually do something about organizational bullshit, and this Executive Digest provides a sequential framework that enables them to do so. They can comprehend it, they can recognize it for what it is, they can act against it, and they can take steps to prevent it from happening in the future. While it is unlikely that any organization will ever be able to rid itself of bullshit entirely, this article argues that by taking these steps, astute managers can work toward stemming its flood.
Although manipulations of visual and auditory media are as old as the media themselves, the recent entrance of deepfakes has marked a turning point in the creation of fake content. Powered by latest technological advances in AI and machine learning, they offer automated procedures to create fake content that is harder and harder to detect to human observers. The possibilities to deceive are endless, including manipulated pictures, videos and audio, that will have large societal impact. Because of this, organizations need to understand the inner workings of the underlying techniques, as well as their strengths and limitations. This article provides a working definition of deepfakes together with an overview of the underlying technology. We classify different deepfake types: photo (face- and body-swapping), audio (voice-swapping, text to speech), video (face-swapping, face-morphing, full body puppetry) and audio & video (lip-synching), and identify risks and opportunities to help organizations think about the future of deepfakes. Finally, we propose the R.E.A.L. framework to manage deepfake risks: Record original content to assure deniability, Expose deepfakes early, Advocate for legal protection and Leverage trust to counter credulity. Following these principles, we hope that our society can be more prepared to counter the deepfake tricks as we appreciate its treats.
Social media? It’s serious! Understanding the dark side of social mediaIan McCarthy
Research and practice have mostly focused on the “bright side” of social media, aiming to understand and help in leveraging the manifold opportunities afforded by this technology. However, it is increasingly observable that social media present enormous risks for individuals, communities, firms, and even the whole of society. Examples for this “dark side” of social media include cyberbullying, addictive use, trolling, online witch hunts, fake news, and privacy abuse. In this article, we aim to illustrate the multidimensionality of the dark side of social media and describe the related various undesirable outcomes. To do this, we adapt the established social media honeycomb framework to explain the dark side implications of each of the seven functional building blocks: conversations, sharing, presence, relationships, reputation, groups, and identity. On the basis of these reflections, we present a number of avenues for future research, so as to facilitate a better understanding and use of social media.
The propensity and speed of technology licensing: at LUISS Guido Carli Univer...Ian McCarthy
Licensing speed: There has been much research interest in the speed of innovation, although few consistent findings have emerged. In this study, we unpack the innovation process and focus on the commercialization stage to examine two questions: Which licensor and patent characteristics determine the speed of licensing? How does the speed of licensing impact the royalties and lumpsum payments to licensors? We addressed these questions by proposing that licensing speed is influenced by variables for licensor prominence (size and experience), licensor knowledge structuration (technological depth, technological breadth and experience), and patent appeal (forward citations, scope and complexity). We predict and find that these variables work to increase the size, complexity and duration of the licensing-out task, while also allowing licensors to take their time to review, negotiate and select agreements with higher royalty rates. These findings are counter to arguments for a fast-paced innovation strategy, as it suggests that for the commercialization stage of the innovation process the relationship between licensing speed and licensor royalty
rates rewards a ‘less haste, greater payoff approach.
Seven steps for framing and testing a research paperIan McCarthy
I use the steps in this presentation to:
(i) test research ideas for research papers,
(ii) shape research papers, and
(iii) help draft the Introduction section of a research paper.
For each step I draft one or two concise paragraphs.
I then present and share these with co-authors, collaborators and colleagues to test the ideas and get feedback on how interesting and valid they are.
I consider and work through these steps several times during the life of a research paper framed.
Discover the innovative and creative projects that highlight my journey throu...dylandmeas
Discover the innovative and creative projects that highlight my journey through Full Sail University. Below, you’ll find a collection of my work showcasing my skills and expertise in digital marketing, event planning, and media production.
Putting the SPARK into Virtual Training.pptxCynthia Clay
This 60-minute webinar, sponsored by Adobe, was delivered for the Training Mag Network. It explored the five elements of SPARK: Storytelling, Purpose, Action, Relationships, and Kudos. Knowing how to tell a well-structured story is key to building long-term memory. Stating a clear purpose that doesn't take away from the discovery learning process is critical. Ensuring that people move from theory to practical application is imperative. Creating strong social learning is the key to commitment and engagement. Validating and affirming participants' comments is the way to create a positive learning environment.
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The world of search engine optimization (SEO) is buzzing with discussions after Google confirmed that around 2,500 leaked internal documents related to its Search feature are indeed authentic. The revelation has sparked significant concerns within the SEO community. The leaked documents were initially reported by SEO experts Rand Fishkin and Mike King, igniting widespread analysis and discourse. For More Info:- https://news.arihantwebtech.com/search-disrupted-googles-leaked-documents-rock-the-seo-world/
[Note: This is a partial preview. To download this presentation, visit:
https://www.oeconsulting.com.sg/training-presentations]
Sustainability has become an increasingly critical topic as the world recognizes the need to protect our planet and its resources for future generations. Sustainability means meeting our current needs without compromising the ability of future generations to meet theirs. It involves long-term planning and consideration of the consequences of our actions. The goal is to create strategies that ensure the long-term viability of People, Planet, and Profit.
Leading companies such as Nike, Toyota, and Siemens are prioritizing sustainable innovation in their business models, setting an example for others to follow. In this Sustainability training presentation, you will learn key concepts, principles, and practices of sustainability applicable across industries. This training aims to create awareness and educate employees, senior executives, consultants, and other key stakeholders, including investors, policymakers, and supply chain partners, on the importance and implementation of sustainability.
LEARNING OBJECTIVES
1. Develop a comprehensive understanding of the fundamental principles and concepts that form the foundation of sustainability within corporate environments.
2. Explore the sustainability implementation model, focusing on effective measures and reporting strategies to track and communicate sustainability efforts.
3. Identify and define best practices and critical success factors essential for achieving sustainability goals within organizations.
CONTENTS
1. Introduction and Key Concepts of Sustainability
2. Principles and Practices of Sustainability
3. Measures and Reporting in Sustainability
4. Sustainability Implementation & Best Practices
To download the complete presentation, visit: https://www.oeconsulting.com.sg/training-presentations
What is the TDS Return Filing Due Date for FY 2024-25.pdfseoforlegalpillers
It is crucial for the taxpayers to understand about the TDS Return Filing Due Date, so that they can fulfill your TDS obligations efficiently. Taxpayers can avoid penalties by sticking to the deadlines and by accurate filing of TDS. Timely filing of TDS will make sure about the availability of tax credits. You can also seek the professional guidance of experts like Legal Pillers for timely filing of the TDS Return.
"𝑩𝑬𝑮𝑼𝑵 𝑾𝑰𝑻𝑯 𝑻𝑱 𝑰𝑺 𝑯𝑨𝑳𝑭 𝑫𝑶𝑵𝑬"
𝐓𝐉 𝐂𝐨𝐦𝐬 (𝐓𝐉 𝐂𝐨𝐦𝐦𝐮𝐧𝐢𝐜𝐚𝐭𝐢𝐨𝐧𝐬) is a professional event agency that includes experts in the event-organizing market in Vietnam, Korea, and ASEAN countries. We provide unlimited types of events from Music concerts, Fan meetings, and Culture festivals to Corporate events, Internal company events, Golf tournaments, MICE events, and Exhibitions.
𝐓𝐉 𝐂𝐨𝐦𝐬 provides unlimited package services including such as Event organizing, Event planning, Event production, Manpower, PR marketing, Design 2D/3D, VIP protocols, Interpreter agency, etc.
Sports events - Golf competitions/billiards competitions/company sports events: dynamic and challenging
⭐ 𝐅𝐞𝐚𝐭𝐮𝐫𝐞𝐝 𝐩𝐫𝐨𝐣𝐞𝐜𝐭𝐬:
➢ 2024 BAEKHYUN [Lonsdaleite] IN HO CHI MINH
➢ SUPER JUNIOR-L.S.S. THE SHOW : Th3ee Guys in HO CHI MINH
➢FreenBecky 1st Fan Meeting in Vietnam
➢CHILDREN ART EXHIBITION 2024: BEYOND BARRIERS
➢ WOW K-Music Festival 2023
➢ Winner [CROSS] Tour in HCM
➢ Super Show 9 in HCM with Super Junior
➢ HCMC - Gyeongsangbuk-do Culture and Tourism Festival
➢ Korean Vietnam Partnership - Fair with LG
➢ Korean President visits Samsung Electronics R&D Center
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Understanding the effects of outsourcing: unpacking the total factor productivity variable
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Understanding the effects of outsourcing: unpacking
the total factor productivity variable
Ben Kitcher
a
, Ian P. McCarthy
b
, Sam Turner
a
& Keith Ridgway
a
a
AMRC with Boeing, Advanced Manufacturing Park, University of Sheffield, Wallis Way,
Catcliffe, Rotherham S60 5TZ, UK
b
Beedie School of Business, Simon Fraser University, 500 Granville Street, Vancouver, BC
V6C 1W6, Canada
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To cite this article: Ben Kitcher , Ian P. McCarthy , Sam Turner & Keith Ridgway (2013): Understanding the effects of
outsourcing: unpacking the total factor productivity variable, Production Planning & Control: The Management of Operations,
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2. Production Planning & Control
Vol. 24, Nos. 4–5, April–May 2013, 308–317
Understanding the effects of outsourcing: unpacking the total factor productivity variable
Ben Kitchera
, Ian P. McCarthyb*, Sam Turnera
and Keith Ridgwaya
a
AMRC with Boeing, Advanced Manufacturing Park, University of Sheffield, Wallis Way, Catcliffe, Rotherham S60 5TZ,
UK; b
Beedie School of Business, Simon Fraser University, 500 Granville Street, Vancouver, BC V6C 1W6, Canada
(Received in final form 10 November 2011)
Research on why firms should outsource and how they should do it has proliferated in the past two decades, but
few consistent findings have emerged concerning the benefits of outsourcing. We argue that this is in part due to
the lack of an adequate framework for measuring the effects of outsourcing. To address this, we present such a
framework based upon the Cobb–Douglas productivity function. We explain how our framework can be used to
unpack one component of the Cobb–Douglas productivity function, the ‘total factor productivity’, which
represents the other numerous sub-variables that affect outsourcing productivity, beyond the capital and labour
expenditures. We also demonstrate the framework using a simple illustrative example.
Keywords: outsourcing; Cobb–Douglas; total factor productivity; aerospace; manufacturing; Ishikawa diagram
1. Introduction
The practice of outsourcing is when one company
contracts out a part of its existing internal activity to
another company (Lei and Hitt 1995, McCarthy and
Anagnostou 2004). It is an activity that has gained
prominence both in management practice and in the
research literature. Particular attention has been paid
by researchers to the labour market and the produc-
tivity effects of outsourcing practices, where empirical
evidence is often employed to examine the effects of
outsourcing. However, these and other studies present
conflicting findings and arguments over the effective-
ness of outsourcing practices (Dabhilkar and
Bengtsson 2007). We suggest that these contradictory
results can be explained in part due to the method used
to measure the effects of outsourcing (Horgos 2009).
To help researchers and managers better under-
stand the productivity (i.e. efficiency of production)
implications arising from a decision to outsource, we
present and illustrate a framework that relates business
inputs (capital and labour) to useful outputs (goods or
services). Central to our framework is the
Cobb–Douglas (1928) productivity function, a simple
and seminal algebraic expression relating production
output to production inputs. The function also
employs a third variable or factor, total factor
productivity (TFP), to crudely account for the other
innumerate impacting variables (beyond labour and
capital) that also affect productivity. The
Cobb–Douglas function was primarily developed to
describe productivity effects arising from the alteration
of labour and capital, the two endogenous variables
that can be controlled to some extent by managers.
However, the Cobb–Douglas function has been exten-
sively employed to gain a retrospective insight as to
whether an outsourcing decision has made a positive
impact upon the productivity of the firm by evaluating
the amalgamated exogenous variables in the form of
TFP (e.g. Girma and Go¨ rg 2004, Olsen 2006, Gorg
et al. 2008). The outcomes of these investigations
suggest there is only a tenuous trend between out-
sourcing intensity and productivity. Thus, we assert
that it is important to be able determine the TFP for
different outsourcing decisions ex ante by identifying
and evaluating the pertinent factors affecting the
potential TFP change.
To this end, we present a framework that can be
used to unpack the TFP variable into a number of
specific sub-variables or categories. This follows other
studies that closely examined the make-up of other
contingent factors such as industry uncertainty
(Milliken 1987) and industry velocity (McCarthy
et al. 2010). Our framework also complements other
outsourcing frameworks (e.g. Fixler and Siegel 1998,
Vining and Globerman 1999) and make-versus-buy
frameworks (Platts et al. 2002), in that we argue that
outsourcing performance is contingently dependent on
how TFP indicators combine with labour and capital
variables to influence the success or failure of an
outsourcing decision.
*Corresponding author. Email: imccarth@sfu.ca
ISSN 0953–7287 print/ISSN 1366–5871 online
ß 2013 Her Majesty the Queen in Right of Canada
http://dx.doi.org/10.1080/09537287.2011.648543
http://www.tandfonline.com
Downloadedby[SimonFraserUniversity]at09:4829January2013
3. We present our arguments in three sections. In
Section 2, we review the research on the impact of
outsourcing in the operations management and strat-
egy literature focusing on the opportunities that this
study presents for developing the TFP framework. In
Section 3, we present our framework by introducing
the TFP concept and then defining some categories of
sub-variables that could affect an outsourcing decision.
Then, we illustrate the framework and method. We do
this by presenting a simple illustrative to show how
potential relationships among the TFP variable and
outsourcing performance categories can be unpacked.
In Section 4, we explore the implications of our
framework for managers and scholars interested in
understanding and measuring the impact of
outsourcing.
2. Research on the impact of outsourcing
There has been a profusion of management and
economic research on outsourcing ever since the
practice gained prominence during the latter half of
the twentieth century. Generally, much of this research
focuses on two broad themes: labour market effects
(Feenstra and Hanson 1999) and aggregate- and firm-
level productivity and efficiency (Gilley and Rasheed
2000, Raa and Wolff 2001). In terms of operations
management, such effects have prompted researchers
to examine the sourcing strategies of Belgian firms
(Everaert et al. 2007) and how supply chains should be
designed to operate in developing regions (Taps and
Steger-Jensen 2007). Furthermore, McCarthy and
Anagnostou (2004) show how outsourcing in the UK
manufacturing industry reduces the value of a
manufacturing firm, which in turn represents a decline
in the gross domestic product of the industry, as
services and other non-manufacturing activities are
outsourced.
In a review of the outsourcing literature, Jiang and
Qureshi (2006) argued that outsourcing research
focuses on three themes. Two of the themes that
dominate the literature are understanding the determi-
nant factors that prompt the decision to outsource and
exploring the methods by which a company imple-
ments outsourcing. The third, less developed theme
(accounting for less than 20% of papers reviewed) is
those studies that focus on the impact or results of an
outsourcing activity. One reason we suggest for the
limited attention to studying outsourcing results is the
lack of a framework that guides researchers on how to
contingently measure the relationship between differ-
ent outsourcing decisions and corresponding outputs.
To address this and respond to Jiang and Qureshi’s
(2006) call for researchers to pursue result-based
research on outsourcing, we present and illustrate a
framework that focuses on unpacking the TFP vari-
able. This allows researchers and managers to
determine and quantify some of the categories of
TFP sub-variables that affect outsourcing performance
and to identify some of the outsourcing opportunities
which best represent productivity growth opportuni-
ties. We are motivated to develop this framework,
because we believe the link between outsourcing
intensity and productivity is too simplistic, i.e. a
single dimension is insufficient to account for the
array of influencing factors on TFP magnitude.
Table 1 lists some of the major studies in manage-
ment and economics that have used TFP to examine
outsourcing results. They were selected using the terms
TFP, outsourcing and ‘Total Factor Productivity’.
Looking across these studies, we identify three themes
that support and motivate our study. First, as all the
studies listed in Table 1 employed TFP to justify a link
between productivity change and outsourcing, they
provide arguments that support the need to better
estimate the impact of outsourcing on productivity.
For example, Olsen (2006) provides a comprehensive
review of the prior research that used the
Cobb–Douglas function to identify a trend between
outsourcing intensity (i.e. ratio of purchased and
created goods and/or services) and the productivity
of the firm or industry. He argues that such studies are
needed because the impacts of outsourcing on produc-
tivity have received only little attention. Similarly,
Girma and Go¨ rg (2004) focus on three separate UK
manufacturing industries over the period 1982–1992
and use TFP to examine whether outsourcing has a
positive effect on productivity.
Second, in no instance is an unequivocal link
between outsourcing intensity and productivity
increase proven. While a link is plausible based upon
the findings of the literature identified, the mechanisms
by which this would operate have not been considered.
Olsen (2006) concludes that using TFP growth or
magnitude as a measure, the reports studied indicate
that in 59% of cases an improvement in productivity
has been noticed and that in 41% of studies no
improvement is seen. He concludes that ‘there are no
clear patterns as to how outsourcing affects produc-
tivity’; moreover, productivity growth ‘much seems to
depend on sector- and firm-specific characteristics’
(Olsen 2006, p. 28). From this it seems that a weak
relationship between outsourcing intensity and
improved productivity exists; however, it also suggests
that the act of outsourcing itself might not directly lead
to increased productivity, reduced costs or improved
resource efficiency.
Production Planning & Control 309
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4. Third, we note that in the instances that changes in
TFP have been measured, it is in conjunction with the
measurement of structural or environmental changes,
such as radical changes in technological capability. For
example, Feenstra and Hanson (1999) examined how a
TFP increase can be attributed to specific changes
carried out by the business. They observed that
outsourcing accounted for a 15% increase in TFP
magnitude, while technological innovation was respon-
sible for a 30% growth under the same conditions.
These observations are the products of investigations
which aim to identify the variables that predetermine
the success of an outsourcing decision. However, it is
also observed that no single variable offers a signal of
sufficient clarity to be distinguishable above the
combined magnitude of all other signals. From this,
we focus in this article on understanding how multiple
variables could be considered to assess the impact of
outsourcing.
Together, the literature in Table 1 indicate that the
outsourcing of internal functions can have a significant
impact upon firm productivity, but the magnitude and
direction of that impact is not always favourable and is
difficult to predict without a more fine-grained analysis
of the TFP term. This leads us to believe that there is a
significant gap in the understanding of how the context
of outsourcing decision affects outsourcing perfor-
mance. That is, the data in the existing literature is
concerned with outsourcing and using aggregate TFP
to assess success. Thus, it does not have the resolution
for us to be able to differentiate the factors between an
outsourcing decision which leads to increased produc-
tivity and one which does not, and the use of TFP until
now should be categorised as ‘determinant’, as
described by Jiang and Qureshi (2006). Olsen’s (2006)
statement that sector- and firm-specific characteristics
affect the productivity growth supports our effort in
this article to divide together the variables which
describe the firms ‘situation’; the financial, geograph-
ical and technical landscape in which the firm operates.
To this end, we suggest some exogenous and endog-
enous variables fitting into those financial, geograph-
ical and technological categories which ultimately
influence the magnitude of TFP growth the firm
Table 1. Research on outsourcing and TFP.
Authors Approach Industries Key findings
Olsen (2006) Survey of literature relating
to productivity effects of
outsourcing, using TFP
growth as a benchmark
indicator
Various manufacturing,
both firm and aggregate
level
The link between outsour-
cing and productivity
benefit is weak; some
benefit is noticed in small
manufacturing firms
Feenstra and Hanson (1999) Compares TFP values for
companies operating in a
‘large country’ at aggre-
gate level, seeking to dis-
tinguish between the
benefits seen through
technology implementa-
tion and through out-
sourcing intermediate
services
SIC manufacturing indus-
tries (aggregated)
Increased technology is
responsible for 35%
increase in the relative
income of non-produc-
tion workers, whereas
outsourcing is responsi-
ble for around 15%.
Girma and Go¨ rg (2004) Uses firm-level (SIC) data
to analyse TPF growth
UK chemical, mechanical,
instrument and electronic
manufacturing
Intensive outsourcing is
directly proportional to
firm-level TFP growth
Gorg et al. (2008) Firm-level data is used to
distinguish between the
effects of materials and
service outsourcing in
manufacturing firms
Irish manufacturing com-
panies, domestically and
internationally owned
Services outsourcing has
little effect on productiv-
ity for firms who do not
export, but has notice-
able effect for those
exporting
Raa and Wolff (2001) A consolidation framework
is used to distinguish
between goods and ser-
vices outsourcing and
their respective effects
upon productivity
US manufacturing firms TFP growth in the
manufacturing industry
during the period
1977–1987 was aided by
the outsourcing of inter-
mediate service functions
310 B. Kitcher et al.
Downloadedby[SimonFraserUniversity]at09:4829January2013
5. should expect as a result of the particular outsourcing
decision. A set of such parameters was outlined in the
report by Jiang and Qureshi (2006, p. 48) in their
framework for outsourcing results analysis, and
categorised into those parameters which have available
data to be measured and those which are not supported
and therefore immeasurable. In that particular
instance, however, due to the retrospective nature
of the study, only data which happened to be recorded
at the time were available. In this article, we argue that
these fiscal, physical and technological parameters can
be addressed as key metrics, critical to the outcome of
the productivity evaluation.
3. Outsourcing: a TFP framework
In this section, we define and discuss the TFP variable.
We then describe a framework that can be used to
examine how the composition of this variable would
impact an outsourcing decision. To do this, we present
an illustrative outsourcing example and show how the
context of the example can be analysed using the
framework so as to offer insight and benefit to
managers.
3.1. Total factor productivity
TFP is a factor in the Cobb–Douglas (1928) produc-
tion function. The now seminal function was intro-
duced as a means to evaluate firm-level and aggregated
production magnitudes. The typical two input produc-
tivity function describes productivity in terms of the
capital and labour applied to a product (Durrand 1937,
Aigner and Chu 1968). Capital and labour are subject
to an efficiency variable, which is known as the TFP.
The classic two-input Cobb–Douglass function is
stated in the following form:
y ¼ AL
K
6. where Y is the process output, the magnitude of
productivity. Typically, this would be measured in
terms of quantities of good produced, or revenue
generated through sales or exports (if considering an
aggregated national product). In this article, we
consider the process output to be directly proportional
to TFP, where capital and labour inputs are
constraints.
A is the TFP; the other numerous sub-variables
(beyond that explicitly accounted for capital and
labour) that affect the productivity. The aim of this
article is to present a framework for identifying,
grouping and evaluating the implicit sub-variables
that might constitute the TFP for different outsourcing
decisions.
L is the labour input, the hours of labour invested
per product. This is assumed to be constant and
exclusive from TFP. In reality, however, a change in
TFP might have a subsequent affect upon hours
required, but to preserve simplicity for the present
examination, the labour hours required per product is
benchmarked by the in-house process.
K is the capital input, the capital investment
required to facilitate production, for both recurring
and non-recurring expenditure. As with labour invest-
ment, this variable is considered constant for our
examination despite fair assumption that some TFP
inputs might affect the amount of capital required to
carry out production.
and
7. are the elasticity constants; these exponents
account for diminishing returns, i.e. the values of and
8. should each equal less than 1, such that the marginal
product diminishes as capital and labour inputs are
increased. The values of and
9. are derived by means of
best fit to the existing data. Cobb and Douglass (1928)
themselves employed an value of 0.75 (and conse-
quently
11. ¼ 1) which
achieved a suitable fit to their 1899–1922 production
data. Subsequent studies (using the Durrand (1937)
independent exponent form) have tended to agree with
values of these magnitudes. For example, Meeusen and
van Den Broeck (1977) analysed the 1962 Census of
Manufacturing Industries, demonstrating values for
and
12. ranging from 0.71 to 0.84 and 0.15 to 0.34,
respectively, with a combined figure closely approxi-
mating 1. The values of and
13. are circumstantial; they
are specific to a particular industry, geographic location
and time period and like TFP are products of the
environment in which the company operates. Again like
TFP, the elasticity constraints are defined by human
actions and typically quantified at an aggregate level;
however, these do not vary significantly over time or
between economic or social conditions. As such, for this
examination, they are assumed to be fixed.
Furthermore, for the studies mentioned in Table 1,
and
14. have also been assumed static, such that
productivity changes can be expressed as a product of
TFP only.
A criticism of the Cobb–Douglass function con-
cerns its applicability and validity. Labini (1995), for
instance, argues that the static values assigned to and
15. are insufficient to be able to account for the
distribution of production shares, and that a dynamic
value (i.e. one that accounts for fluctuations in the rate
of change of marginal product) should be implemented
in their place. Also, Barnett (2004) points out that the
dimensions of the constant TFP are raised to the power
of the exponents of labour and capital. Should these
exponents each equal unity, the dimensions are
Production Planning Control 311
Downloadedby[SimonFraserUniversity]at09:4829January2013
16. acceptable and meaningful, but we have already
established non-integer values 1 are typical, in
which case the dimensions of TFP are meaningless.
Such criticisms indicate that TFP, while appropriate
for examining the link between outsourcing and
performance, has been treated as a ‘dumb’ number.
This constrains the TFP to a measurable but unin-
telligible variable unable to help decision makers assess
a current, unique set of outsourcing circumstances.
With the following framework, we present a method by
which managers can evaluate the circumstances in
which they are exposed to, the effect these decisions
might have on the TFP value they should expect to
achieve through implementation of an outsourcing
strategy.
3.2. The framework
The framework we present is used to unpack and
define TFP for different outsourcing decisions.
It involves two major steps.
In the first step, we employ the problem-solving
tool, the Ishikawa (1990) diagram, to unpack TFP
variable into a number of sub-variables. We identify
TFP as the observed effect or symptom in the Ishikawa
diagram, from which point we can begin to draw out
the sub-variables which influence it, and furthermore
the subsequent variables influencing them. Each level
of variable is broken down until we have variables that
can be individually measured. As a problem-solving
method, the Ishikawa diagram assumes that each
‘branch’ or sub-variable (Figure 1) is of equal impor-
tance to its counterparts at the same hierarchical level.
We note, however, that some of the branches will
ultimately have a greater influence on the TFP
magnitude than others, but for now the diagram
serves the purpose of allowing us to illustrate the
causes behind TFP magnitude changes. Furthermore,
while the Ishikawa diagram traditionally has four
branches or the 4 Ms – materials, machines, manpower
and methods – that unpack the causes behind internal
manufacturing process problems, the branches of the
Figure 1. Example of how the Ishikawa diagram can be used to unpack TFP.
312 B. Kitcher et al.
Downloadedby[SimonFraserUniversity]at09:4829January2013
17. diagram can be altered to focus on variables pertinent
to different situations. We employ the four perspec-
tives, customer, financial, internal business process and
learning and growth, from the strategic performance
management tool, the balanced scorecard (BSC)
(Kaplan and Norton 1992). These perspectives provide
a coherent link between a corporate mission statement
and the behaviours and outputs of firms and thus can
be used as sub-variables to unpack and make the
causes of TFP growth intelligible. The first of these
sub-variables is the financial perspective, which is
intended to describe the performance of the business
from the perspective of the shareholder. Second, the
customer perspective is a sub-variable for how out-
sourcing decisions affect the perception of the cus-
tomer of the business. Further, the internal business
process perspective is the sub-variable for how out-
sourcing impacts the internal processes by which the
business creates value. Finally, the learning and growth
perspective is the sub-variable that measures how the
outsourcing decision will extend, diminish or shift
existing knowledge gaps and present growth
opportunities.
The second step in our framework involves taking
the ‘measurable’ variables defined in the Ishikawa
diagram, and creating a comparison table to examine
how each variable might vary for different
outsourcing options. To do this, the existing in-house
(non-outsourcing option) is scored zero, and the
variables for each outsourcing option are allocated
either a positive or negative score. The scores of the
comparison table are then summed to assess the
relative positive and negative effects each outsourcing
option has on productivity.
3.3. Framework illustration
By means of example, we proffer a hypothetical
situation whereby two alternative external suppliers
are being considered by an North American owned
and located manufacturing company to carry out a
non-core manufacturing process. The particular mea-
sures we use for this illustrative example were derived
from the authors’ experience in the aerospace
manufacturing sector. The primary branches of
Figure 1 were defined by the BSC perspectives –
financial, customer, internal business process and
learning and growth – and provide a universal starting
point for considering the potential implications of an
outsourcing decision.
Two potential supplying companies are considered.
They manufacture a typical static gas turbine engine
component. One is a long established and reputable
local supplier and the other is a recent internationally
located entrant to the market. The suppliers are
characterised by the criteria shown in Table 2. To
score and compare the suppliers using the TFP
sub-variables shown in Figure 1, we present Table 3.
It indicates that the benchmark (in-house) method
would yield no difference in TFP, supplier 1 would
result in an increase in TFP on the basis of a score of
þ5 and supplier 2 would offer further benefit over both
the benchmark and supplier 1 with a score of þ9. We
deconstruct these scores to develop general comments
about the categories of sub-variables as follows.
3.3.1. Customer
Supplier 1 offers an overall negative effect upon TFP
magnitude due to not being able to control delivery
schedules. Supplier 2 offers overall benefit despite
negative connotations of offshore outsourcing: sup-
plier brand affiliation and the attractiveness to new
customers both suffer due to increased perception of
quality escapes caused by outsourcing.
3.3.2. Financial
The example indicates supplier 1 to be the most
preferred source in terms of cost, centring around
Table 2. Description of potential suppliers.
Characteristic Supplier 1 Supplier 2
Geographic proximity Based in a similar geographic location to the
purchasing company
Geographically distant from the purchasing
company
Growth approach Long established business based on traditional
working methods
Business model based around rapid growth
Labour force Skilled labour with higher wages Low labour cost
Capabilities Similar capabilities to in-house manufacture Maintains and implements cutting edge
technology
Process Small batch sizes Large batch sizes
Production Planning Control 313
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18. a benefit in reduced capital expenditure. Supplier 2 also
offers negligible benefit according to the example.
3.3.3. Internal business processes
Both suppliers 1 and 2 appear to offer similar benefit to
the purchasing company through the liberation of
hours to be spend on core competences.
3.3.4. Learning and growth
Both suppliers 1 and 2 offer great benefit to the
purchasing company by opening knowledge diffusion
routes.
Analysis of this illustrative scoring example (parti-
cularly the cost-based variables) highlights a limitation
in our relatively simplistic comparison method. By not
assigning importance to each sub-variable, and simi-
larly not calculating magnitudes of differentiation for
our measurable variables, we allow what might be
insignificant factors such as transportation/logistical
expenses to take an equal leverage upon overall score
as a primary aspiration such as processing cost
reduction. This manifests itself as a reduced magnitude
for the total financial benefit, despite the intention of
our demonstrative scoring to show that supplier 2
would yield a significant cost saving.
A question regarding data being populated into the
study is also presented; how do we confirm the quality
of the data upon which our decision is based? If the
data are not of sufficient quality, does the output of the
exercise offer us any greater insight than a comparison
of recurring cost data (comparison of quotations)
alone? It is clear that if we are to either increase the
number of metrics we are considering, or increase the
volume of empirical data supporting each metric,
the reliability of the result increases.
In sum, the example simply shows how the frame-
work can be used to deduce the most beneficial
outcome (i.e. supplier 2). It maps and makes transpar-
ent our assumptions about benefits in cost reduction as
well as increased customer satisfaction (though
increased product quality) and internal ‘Knowledge
and Learning’ by knowledge diffusion and increased
Table 3. Comparison of suppliers using the metrics in Figure 1.
Category Metrics In house Supplier 1 Supplier 2
Customer Product quality 0 0 1
Delivery 0 À1 1
Value 0 À1 1
Back up 0 À1 1
Attractiveness to new customers 0 À1 À1
Supplier brand affiliation 0 1 À1
Total 0 À3 2
Financial Materials 0 0 1
Processing 0 1 1
Currency exchange 0 0 À1
Contract negotiations 0 À1 À1
Distance 0 0 À1
Transportation modes 0 0 À1
Competition 0 0 À1
Delivery 0 0 1
Quality 0 0 1
TRL 0 1 1
Equipment ownership 0 1 1
Total 0 2 1
Internal business process Labour hours on core productivity 0 1 1
Value of core processes 0 1 1
Labour hours on non-core productivity 0 0 0
Cost of non-core activities 0 0 0
Total 0 2 2
Learning and growth Production volume 0 1 1
Access to new market 0 1 1
Knowledge transfer 0 1 1
Access to technology 0 1 1
Total 0 4 4
314 B. Kitcher et al.
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19. time spent on core competencies. Largely, this is
portrayed by the example and the framework would
suggest that supplier 2 is, all things considered, the
most favourable option for production of the compo-
nent. In the context of TFP, the selection of supplier 2
would facilitate higher production volumes if the same
capital and labour resources are to be committed, or
that capital and/or labour inputs may be decreased to
achieve the current level of productivity. Finally, it is
important to note that in practice evidence would be
presented to support the assumptions and indicate the
impacts of the variables in the framework.
4. Discussion and conclusions
The central contribution of our study is the develop-
ment and illustration of a framework for unpacking
the outsourcing decision using the TFP, a variable in
the Cobb–Douglass function. With this framework, we
argue that it is possible to forecast how TFP variance
for different outsourcing options would impact out-
sourcing performance. This allows managers and
researchers to identify the variables which affect the
contingent benefit realised by an outsourcing decision.
We now discuss several implications of the framework,
of relevance to both management practice and future
empirical research.
First, where several outsourcing options might all
represent an opportunity for benefit, our framework
provides a reliable and sanitised method of quantifying
the magnitude of benefit. However, as argued earlier in
this article, the simplistic comparison method we
present is only an illustration; it is not sufficiently
accurate to prescribe the level of benefit an organisa-
tion should expect to see. Therefore, we suggest that
evaluation and comparison methods for other cognate
decision-making problems could be applied to TFP
forecasting. Currently, there is a considerable gap in
our capability for defining measurable variables (the
secondary branches of the Ishikawa diagram), how we
assign importance to each branch and how we subse-
quently score and evaluate the data. This problem is
suited to multi-criteria decision analysis (MCDA),
which develops methodologies for practitioners to
apply in order to overcome complex decision problems
(Figueira et al. 2005). A commonality between MCDA
theories is the way in which qualitative/quantitative,
explicit/implicit, empirical/derived data is brought
together; dimensionally incompatible information
from disparate sources is handled in nearly all
MCDA problems. It is recognised that MCDA’s
ability to combine these data in a logical fashion,
which replicates the complex evaluation methods we
tacitly employ when faced with such problems, makes
it especially suitable for use in outsourcing decision
problems where we wish to use TFP forecasting.
Second, our literature review highlights how TFP
has already been used with reference to outsourcing
decision problems, furnishing us with data and
accounts of the effects some outsourcing decisions
have already made. Provided we can obtain the
relevant supporting information (as defined by the
preferred MCDA method, above), we suggest applica-
tion of the TFP forecasting method to the pre-existing
studies mentioned in Table 1 and propose how the TFP
forecasting method would suggest that the overall
productivity change would occur compared to the
measured value in each study. As well as being a
pertinent example of the framework worthy of discus-
sion in itself, this study would allow us to begin to
generate weighting factors for the metrics used, which
could be used as baselines in subsequent studies.
Third, our examination might suggest that the TFP
variable itself is a function of the measurable variables
we identified. Although the measurable variables
identified are undeniably linked, significant data are
required to solve an algorithm with so many variables,
so as to generate an explicit function for TFP.
However, application of artificial neural networks
(ANN) may meet the same objective. ANNs are seen
as particularly useful when considering how many
disparate inputs can have impact upon perceivably
unrelated outputs; ‘it is often easier to have data than
to have good theoretical guesses about the underlying
laws governing the systems’ (Zhang et al. 1998, p. 35).
Of course, the accuracy of the TFP magnitude output
would be directly related to the appropriate selection of
input parameters; those inputs would be identified
through testing of the model and alignment with the
data which is both already available to train the
network and would be easily available for the user to
measure.
The framework’s greatest impact remains with
managers faced with an outsourcing decision. With
an ability to identify those factors that affect the
success of outsourcing, managers not only shall be
better informed of the overall impact of the decision,
they will also be aware of those factors which have the
greatest bearing on success. This allows them to
investigate how to affect those factors to best enable
a positive result. The metrics used in the TFP
forecasting method would be expected to vary between
firms, and due to the size of some multinational firms
some discrepancy in forecasting metrics may be evident
within the same organisation also. To investigate this,
and to capture universal opinion on the drivers of TFP,
we suggest that a Delphi Analysis be carried out to
Production Planning Control 315
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20. determine the company’s overall TFP forecasting
criteria and their rankings.
Notes on contributors
Ben Kitcher is a Lead Engineer for
machining processes at the University
of Sheffield’s Advanced
Manufacturing Research Centre
(AMRC). Ben has worked at the
Centre for 5 years, developing deci-
sion support tools for the selection of
manufacturing processes, research
projects and product developments.
The tools developed include elements of the Trade Study
method, the Analytical Hierarchy Process and the Balanced
Scorecard. Combination of these elements has yielded a tool
set and process template which has particular relevance to
mid-to-high TRL projects, having already been proven in
industrial projects for Rolls-Royce, Messier-Dowty, Boeing,
BAe Systems and to research projects sponsored by TSB and
EU FP7.
Professor Ian McCarthy is the Canada
Research Chair in Technology and
Operations Management in the
Faculty of Business Administration
at Simon Fraser University. He
received his MSc and PhD degrees
from the University of Sheffield, and
prior to joining Simon Fraser
University he was a Faculty Member
at the Universities of Warwick and Sheffield. Focusing on
technology-based firms, Professor McCarthy is well known
for his work on how firms should be designed and managed,
in terms of their operations, so as to succeed in different
industries. He uses complex systems theory, evolutionary
theory and classification methods to identify and map the
different operational designs that firms must adopt. In
particular, he is interested in how firms differ in their new
product development processes, RD management control
systems, outsourcing practices and collaborative networks.
Dr Sam Turner is the Head of the
Process Technology Group at the
Advanced Manufacturing Research
Centre (AMRC) and has worked
with the AMRC since its foundation
in 2001 on machining technologies,
growing the group to 50 strong. Since
this time, he has undertaken research
in machining dynamics, titanium and
nickel alloy machining, machine tool adaptive control,
cutting tool design and machining strategies. The research,
sponsored through EPSRC, TSB, EU FP6, FP7 and indus-
try, has been recognised in industry as delivering step change
technologies. He has over 10 peer reviewed journal and
conference papers on machining technology and has exten-
sive experience of applying this research to industrial projects
and uses this experience to focus on the significant gaps
within the current fields of research that will have step change
impact on future production processes.
Professor Keith Ridgway is the
Executive Dean of the University of
Sheffield Advanced Manufacturing
Institute comprising the Advanced
Manufacturing Research Centre with
Boeing (AMRC) and the Nuclear
AMRC. The AMRC was established
in 2001 to carry out research in
manufacturing technologies directly
related to the aerospace industry. In addition to Boeing, the
AMRC has more than 60 sponsors, including BAe Systems,
Rolls-Royce and Messier Dowty. Application of the research
developed has led to a step change in the manufacturing
capability of many of the industrial sponsors and encouraged
their on-going commitment and support. He is a Fellow of
the Royal Academy of Engineering, the Institution of
Mechanical Engineers, Royal Institute of Naval Architects
and Royal Aeronautical Society and was awarded the OBE
for services to UK manufacturing industry in June 2005.
He has over 160 publications including 57 journals articles.
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