Outsourcing in the service based industries: an analysis using transaction cost economics and knowledge‐based view

While intense global competition drives firms to move knowledge‐based activities offshore to take advantage of inexpensive foreign labour, there are increased costs with monitoring and managing activities located in distant locations. Additionally, certain knowledge types may be more difficult to transfer and assimilate across national borders. Both transaction cost economics and the knowledge‐based view focus on important but separate issues related to offshore outsourcing. In this paper we combine both theoretical views and offer five propositions which we test using the data from two exploratory case studies. Finally, we discuss our results and give implications for future research.