Post on 28-Feb-2023
This article was downloaded by: [University of Maastricht]On: 22 January 2015, At: 13:15Publisher: RoutledgeInforma Ltd Registered in England and Wales Registered Number: 1072954 Registeredoffice: Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UK
Industry and InnovationPublication details, including instructions for authors andsubscription information:http://www.tandfonline.com/loi/ciai20
Leveraging Offshoring: TheIdentification of New BusinessOpportunities in International SettingsFederica Angeli a b & Rosa Grimaldi ba India Institute, Maastricht University , Maastricht, TheNetherlandsb Department of Management , University of Bologna , Bologna,ItalyPublished online: 20 Aug 2010.
To cite this article: Federica Angeli & Rosa Grimaldi (2010) Leveraging Offshoring: TheIdentification of New Business Opportunities in International Settings, Industry and Innovation, 17:4,393-413, DOI: 10.1080/13662716.2010.496245
To link to this article: http://dx.doi.org/10.1080/13662716.2010.496245
PLEASE SCROLL DOWN FOR ARTICLE
Taylor & Francis makes every effort to ensure the accuracy of all the information (the“Content”) contained in the publications on our platform. However, Taylor & Francis,our agents, and our licensors make no representations or warranties whatsoever as tothe accuracy, completeness, or suitability for any purpose of the Content. Any opinionsand views expressed in this publication are the opinions and views of the authors,and are not the views of or endorsed by Taylor & Francis. The accuracy of the Contentshould not be relied upon and should be independently verified with primary sourcesof information. Taylor and Francis shall not be liable for any losses, actions, claims,proceedings, demands, costs, expenses, damages, and other liabilities whatsoever orhowsoever caused arising directly or indirectly in connection with, in relation to or arisingout of the use of the Content.
This article may be used for research, teaching, and private study purposes. Anysubstantial or systematic reproduction, redistribution, reselling, loan, sub-licensing,systematic supply, or distribution in any form to anyone is expressly forbidden. Terms &Conditions of access and use can be found at http://www.tandfonline.com/page/terms-and-conditions
Research Paper
Leveraging Offshoring: TheIdentification of New BusinessOpportunities in International
Settings
FEDERICA ANGELI* ** & ROSA GRIMALDI**
*India Institute, Maastricht University, Maastricht, The Netherlands, **Department of Management, University of
Bologna, Bologna, Italy
ABSTRACT This work aims to shed light on the process through which small and medium-sized
enterprises (SMEs) identify new business opportunities within their ongoing offshoring activities. Empirical
evidence is drawn on the case of think3, an Italian medium-sized software company that has been offshoring
its R&D activities to Bangalore, India, since the year 2000. In 2004, the company started a brand new “global”
business: from selling software solutions for computer-aided design, it began selling the engineering
capabilities to use its solutions, leveraging highly qualified Indian mechanical engineers. Our analysis
underlines three elements underpinning think3’s ability in envisaging a new profitable business opportunity.
These are its experiential knowledge of: (a) the markets, clients and competitors, (b) the offshore context, and
(c) the internationalization process as a software house, embodied in the ability to promote offshore cultural
integration and to align home and offshore operations. This study enables a better understanding of the factors
triggering the recognition of new business opportunities by SMEs, at the international level.
KEY WORDS: New opportunity identification, international entrepreneurship, offshoring of high-value activities,
experiential international knowledge, SMEs’ internationalization
Introduction
The offshoring of high-value activities to captive centres, external service providers or
alliance partners located in emerging countries is becoming an imperative for very many
companies willing to save costs and, at the same time, to access a pool of highly qualified
professionals (Agrawal et al., 2003; Dutta and Roy, 2005; Levy, 2005).
Offshoring is mainly pursued through the establishment of proprietary subsidiaries
(captive offshoring) or through the outsourcing to external providers (offshore outsourcing)
1366-2716 Print/1469-8390 Online/10/040393–21 q 2010 Taylor & Francis
DOI: 10.1080/13662716.2010.496245
CorrespondenceAddress:Federica Angeli, India Institute, Maastricht University, Minderbroedersberg 8, P. O. Box 616,
6200 MD, Maastricht, The Netherlands. Tel.: þ 31 (0)43 3883068. Email: federica.angeli@maastrichtuniversity.nl
Industry and Innovation,
Vol. 17, No. 4, 393–413, August 2010
Dow
nloa
ded
by [
Uni
vers
ity o
f M
aast
rich
t] a
t 13:
15 2
2 Ja
nuar
y 20
15
(Lewin and Peeters, 2006a; Doh et al., 2009). Overall the phenomenon involves both large
multinational enterprises (MNEs) and small and medium-sized enterprises (SMEs).
The offshoring of intangibles represents an interesting setting to study companies’
growth processes in international contexts, and their evolution. While companies are
involved in their current offshoring activities, new business opportunities may arise for
further offshoring at the international level (Grimaldi et al., 2009). Emerging countries, which
are the target of offshoring initiatives, may open up new windows and offer new opportunities
for generating innovation and creating value on a global scale.
The internationalization process of large, established companies, has been broadly
addressed by the international business (IB) literature (e.g. Andersson et al., 2002;
Asmussen et al., 2009). More specifically, the IB literature has illustrated the evolutionary
growth processes of MNEs and their impact on the host countries, addressing both
economically developed and emerging settings (Feinberg and Majumdar, 2001; von
Zedtwitz, 2004). Yet, the IB literature has paid scant attention to how opportunities are
crafted by knowledge-based SMEs. We see in the offshoring of intangibles an interesting
setting to analyse this topic.
First, given the nature of offshoring, the exploitation of new business opportunities may
arise from (and be based on) the intangible nature of what is sourced (high value-added,
knowledge-based activities) and does not require the availability of investment in physical
resources, which may be too costly and beyond the interest of many knowledge-based
SMEs. Di Gregorio et al. (2009) highlight that offshoring is particularly appealing for SMEs
because it develops flexibility and it provides them with the possibility to concentrate on their
core competencies, to benefit from location-specific information without the need to invest in
expensive foreign direct investments (FDIs), and to leverage their experiential knowledge in
order to boost their expansion into foreign markets.
Second, there is evidence in the offshoring literature that the evolutionary and growth
processes for SMEs might significantly differ from those of large established companies
and therefore require a different perspective to be understood (Kenney et al., 2009).
Evolutionary processes at the international level of SMEs are often the outcome of
entrepreneurial initiatives that are not planned in advance (are not the result of deliberate
strategies), but arise through bottom-up approaches, and with the objective of exploiting
new opportunities. SMEs may act in a more entrepreneurial fashion, and are likely to be more
ready to react and adopt innovations that arise from offshoring partnerships (Di Gregorio
et al., 2009).
Overall, we find that the literature has paid scant attention to new business opportunity
recognition by SMEs within international settings (Johanson and Vahlne, 2006). In order to
fill this gap, in this paper we address the following research question:
Which are the factors affecting knowledge-based SMEs’ ability to identify new global business
opportunities within their ongoing offshoring initiatives?
We investigate our research question through a case study of an Italian medium-sized
software company, think3, which has been present in India, with two R&D labs, since 2000.
The case study approach is due to the paucity of empirical evidence and theoretical
reflection on the topic of new business opportunity recognition within ongoing
internationalization initiatives (Eisenhardt, 1989; Yin, 1994).
394 F. Angeli & R. Grimaldi
Dow
nloa
ded
by [
Uni
vers
ity o
f M
aast
rich
t] a
t 13:
15 2
2 Ja
nuar
y 20
15
The paper is organized as follows. In the next section the theoretical framework is
presented, with a review of the literature on the evolution of offshoring activities and
opportunity recognition in international settings. The description of the methods follows, and
then the case of think3 is illustrated. After presenting our empirical evidence, in the last
section we discuss the results of our study in the light of the literature addressed in the
theoretical part and we present concluding remarks.
Theoretical Framework
The Evolution of Offshoring Activities
Offshoring, or the relocation of jobs and production to a foreign country, typically refers to the
“migration of processes to India, the Philippines, Ireland, China and elsewhere to lower
costs without significantly sacrificing quality” (Venkatraman, 2004: 14). According to
Manning et al. (2008: 35), offshoring is the “process of sourcing any business task, process,
or function supporting domestic and global operations from abroad, in particular from lower-
cost emerging economies”. Offshoring is making its way up the value chain. Companies are
beginning to offshore high-value activities directly related to their core business, such as
research and development (R&D), engineering services and product design (Bardhan,
2006; Couto et al., 2006; Manning et al., 2008). Offshoring of high-value activities appears to
be driven not only by cost-saving needs, but also by a global sourcing-of-knowledge
rationale and is deemed to be a novel way to undertake internationalization (Maskell et al.,
2006).
While academic researchers and practitioners have attempted to describe the
characteristics of the phenomenon and have explored the antecedents and consequences
of offshoring (Agrawal et al., 2003; Dutta and Roy, 2005; Levy, 2005), less attention has
been devoted to the dynamics of next-generation offshoring (Manning et al., 2008).
More specifically, in the offshoring literature there are no contributions that have looked
at offshoring triggering further offshoring and at how new opportunities are identified in
international settings (Carmel and Agarwal, 2002; Lewin and Peeters, 2006a; Maskell et al.,
2006). New opportunities within ongoing offshoring initiatives are traced back to the
endorsement of tentative experiments that have turned out to be successful (Lewin and
Peeters, 2006b).
In a recent contribution, Manning et al. (2008) have highlighted the importance of
dynamic capabilities for the successful implementation of new business opportunities within
the evolutionary offshoring context. In the specific case of offshoring processes, companies
are concerned not with exploiting advantages built up at home, but with leveraging or gaining
access to dispersed skills, knowledge and resources, through their international operations.
They further tend to rely on international partnerships and joint ventures, which reduce the
high level of risk involved in their leveraged strategies, in combination with internationalized
operations to achieve the desired coordination of resources, activities and routines (Oviatt
and McDougall, 2005).
The identification of new opportunities in international settings (within ongoing
offshoring initiatives) is an important topic for knowledge-based companies. Firms focusing
on knowledge creation and exploitation as the source of advantage are more likely to
develop learning skills (Cohen and Levinthal, 1990; Yli-Renko et al., 2001) useful for
Leveraging Offshoring 395
Dow
nloa
ded
by [
Uni
vers
ity o
f M
aast
rich
t] a
t 13:
15 2
2 Ja
nuar
y 20
15
adaptation and successful growth in new environments than are firms that are more
dependent on tangible resources. Also, since knowledge, explicit knowledge in particular,
is a mobile resource, it provides a flexible platform for international expansion.
Offshoring of high-value activities may offer an interesting setting for studying
opportunity recognition. Emerging countries, which are often offshoring targets, are
currently in a turbulent fast-paced growth phase, which sets a fertile environment for the
development of new business opportunities. At the same time, they display very different
institutional, legal and cultural settings, which offshoring Western companies need to face,
and which may affect their opportunity recognition processes.
Opportunity Recognition in International Settings
Opportunity recognition. Shane and Venkataraman (2000) defined “entrepreneurial
opportunities” as situations in which new goods, services, raw materials and organizing
methods can be introduced and sold at a higher price than their cost of production.
According to Hills (1995), De Koning (1999) and Ardichvili et al. (2003), opportunity
recognition can be viewed as a result of three processes: (1) spotting market needs and/or
underemployed resources, (2) recognizing a fit between market needs and specified
resources, and (3) creating a new fit between separate needs and resources in the form of
business concepts.
Literature distinguishes two main perspectives for studying opportunity recognition:
opportunity identification (which is the perspective that we adhere to in this study)
and opportunity creation. According to the opportunity identification view (Shane and
Venkataraman, 2000), opportunities arise from individuals’ prior knowledge and experiences,
which create knowledge corridors driving opportunity identification (Venkataraman, 1997).
Individuals are in an alertness state through which they capture signals from their surrounding
environment and they combine them with their prior knowledge. A second approach is
represented by opportunity creation, in which the focus is on the creation of new opportunities,
rather than on their selection. It involves design (including the design of alternative goals),
not just choice.
Research on opportunity identification has suggested two broad categories of factors
that influence the probability that individuals will discover opportunities (Shane and
Venkataraman, 2000; Alvarez and Barney, 2008): (a) the possession of prior knowledge
necessary to identify the opportunity, and (b) the ability to identify new means–ends
relationships.
In relation to the former, Shane (2000) identifies prior knowledge of markets, of ways of
serving markets and of customer problems, as being important. He argues that general
business experience, industry experience, functional experience in marketing, product
development and management, and previous start-up experience all contribute information
and skills that increase the likelihood of opportunity identification. The endowment of
knowledge that people possess at the time they happen to identify an opportunity is also
affected by networks of relations (Grimaldi and Grandi, 2003). McGrath (1996) holds that
individuals with a large and well-functioning network are likely to have access to a large
number of promising “shadow options”.
As for the latter, Shane and Venkataraman (2000) hold that even if individuals are privy
to prior knowledge that facilitates the discovery of opportunities, they may fail to make such
396 F. Angeli & R. Grimaldi
Dow
nloa
ded
by [
Uni
vers
ity o
f M
aast
rich
t] a
t 13:
15 2
2 Ja
nuar
y 20
15
a discovery because of their inability to recognize new means–ends relationships. This
recognition involves envisaging the opportunity to redeploy resources away from present,
suboptimal configurations, to more promising opportunities (Kirzner, 1973). This same
recognition further involves seeing a way to redirect or recombine resources in order to
create and deliver value superior to that currently available. Shane and Venkataraman
(2000) argue that people vary in their abilities to combine existing concepts and information
into new ideas (new means–ends relationships) and that this ability is influenced by
cognitive properties.
The literature on opportunity recognition conceives the identification of new
opportunities both as original, new ideas, emerging from individual experience and
ultimately leading to the set up of new ventures, or as new concepts flourishing within the
ongoing activities of established companies, especially as a consequence of their exposure
to new knowledge at the international level (Zahra and George, 2002; Jones and Coviello,
2005; Styles and Seymour, 2006). For knowledge-based SMEs involved in offshoring
activities in foreign countries, opportunity identification might be tricky. The intertwining
of different factors, including knowledge of customers and their requirements (home
market, as well as host country market) is even more complex, because of the geographic
dispersion of competencies and resources, which need to be recombined to fit separate
market needs.
Opportunity recognition in the international business literature. A review of the
international business (IB) literature reveals that empirical studies in the area have given
scant attention to the process of opportunity recognition. The existing theory of
internationalization implicitly assumes that internationalization is preceded by opportunity
recognition but provides little explanation of this (Johanson and Vahlne, 2006). Despite this
importance, and growing calls for greater integration of the entrepreneurship and IB
literature, there are very few empirical studies that focus on the process of international
opportunity recognition.
Attention to this topic has been paid by the international entrepreneurship (IE) literature.
According to Zahra and George (2002: 261) international entrepreneurship is “the process of
creatively discovering and exploiting opportunities that lie outside a firm’s domestic markets
in the pursuit of competitive advantage”. As the authors note, the definition is based on the
literature that highlights opportunity recognition, discovery and exploitation as character-
istics of entrepreneurship. Styles and Seymour (2006) built upon the earlier work by Jones
and Coviello (2005) to define international entrepreneurship as the behavioural processes
associated with the creation and exchange of value through the identification and exploi-
tation of opportunities that cross national borders.
Some authors, in line with the contribution by Shane and Venkataraman (2000), have
illustrated the importance of prior knowledge and of the initial endowment of resources for
opportunities to be identified in the international domain. More specifically, Eriksson et al.
(1997) distinguish three types of experiential knowledge in an international business
context: experiential knowledge of clients, the market and the competitors (foreign business
knowledge), experiential knowledge of government, institutional frameworks, rules, norms
and values (foreign institutional knowledge), and experiential knowledge of the firm’s
capability resources to engage in international operations (internationalization knowledge).
An important aspect of experiential knowledge is that it provides the framework for
Leveraging Offshoring 397
Dow
nloa
ded
by [
Uni
vers
ity o
f M
aast
rich
t] a
t 13:
15 2
2 Ja
nuar
y 20
15
perceiving and formulating opportunities (Johanson and Vahlne, 1977). This implies that
experiential knowledge gives absorptive capacity (Cohen and Levinthal, 1990), which is the
ability to assimilate, evaluate and interpret new knowledge.
Chandra et al. (2009) show that international opportunity discovery requires favourable
conditions to exist within the firm, in terms of prior international and technical knowledge,
intellectual property and openness/access to information sources. Their results show that
the discovery process involves interpreting possible matches between pre-existing means
(resources, skills, new technologies) and new ends (international markets), in a problem-
solving process. All the firms in their study recognized international opportunities only within
their areas of expertise. The personal and business relations and networks in which a firm is
embedded play a critical role in determining how information and ideas move around, and
who can and does know what, and when.
A different, though related set of works that have addressed opportunity recognition in
international settings followed a proposal by Mathews and Zander (2007). They hold that the
features of internationalization by newly internationalizing firms are best captured in a
framework that is found at the intersection of entrepreneurial and internationalization
perspectives, which they propose as international entrepreneurial dynamics (IED). This
framework is important since the traditional IB literature is specifically focused on the
activities and advantages associated with the mature and well-established MNEs, and does
not help in addressing the entrepreneurial features of internationalization typical of very
many SMEs going international. IED is useful in explaining entrepreneurial processes that
stretch from the discovery of new business opportunities in an international context to
aspects of exploitation. Such processes include the redeployment of resources and the
ultimate engagement with international competitors that takes place before organizational
and industry maturity sets in (Mathews and Zander, 2007). This is to say that the IED of firms
encompasses the process of discovering opportunities and, additionally, of integrating and
adapting new business ideas into the ongoing international operations and into the
structures and networks of the global economy.
In both IE and IED, the recognition of opportunities in international settings is
considered as relevant. Yet, neither perspective has looked in detail at the process through
which new opportunities are identified. In the next section we will take a closer look at this
important issue.
Methods
Given the exploratory nature of our research questions, a case-based approach is most
suitable, since it allows for an in-depth analysis of the phenomenon under observation
(Eisenhardt, 1989; Yin, 1994; Lee, 1999). Such a choice is also a result of the paucity of
empirical evidence and theoretical reflection on the topic of new business generation within
ongoing internationalization initiatives (Eisenhardt, 1989; Yin, 1994). Indeed, case studies
allow the tracing of links between variables over time (Yin, 1994; Hoffmann, 2007) and
represent a widespread research methodology, especially when processes of change are
under observation (Doz, 1996; Arino and de la Torre, 1998; Koza and Lewin, 1999; De Rond
and Bouchikhi, 2004).
We observe, with considerable in-depth detail, the case of an Italian software company,
think3, which has been offshoring its R&D activities to Bangalore since 2000. The case of
398 F. Angeli & R. Grimaldi
Dow
nloa
ded
by [
Uni
vers
ity o
f M
aast
rich
t] a
t 13:
15 2
2 Ja
nuar
y 20
15
this company is of particular interest to our research questions for several reasons. Over the
past 30 years, think3 has succeeded in developing software solutions for computer-aided
design, and specifically a proprietary CAD (computer-aided design) product, spotting and
then leveraging the increasing demand for software support to design activities within the
rich local cluster of manufacturing companies. think3 stands out in the Italian scene as one
of the very few Italian software product companies. The starting up of think3’s Indian
operations in 2000, in the early days of India’s rise to global IT prominence, underlines the
innovative and strongly entrepreneurial mindset of the firm. Moving from this experience, we
describe how a brand new business opportunity, labelled as the TDF (The Design Factory),
was identified.
Our case study is not aimed at theory building. Rather, our goal is to gain deeper insight
into a success story and to link it to extant theory, by offering an original perspective on
internationalization through offshoring. The choice of a single case is intended to give depth
to the study (Langfield-Smith and Greenwood, 1998) and to isolate better the links between
the theory and the empirical dynamics (Adler et al., 1999). We collected data through open
interviews with the top management—the Head of think3 Engineering Services (TDF) in
Bologna (Italy), Massimo Signani, and the Head of Engineering Services (TDF) in Bangalore
(India), Anupam Ashtana. Moreover, we held interviews with think3’s human resources
manager, their IT manager, two project managers and eight operators, both in Italy and in
the R&D laboratory in Bangalore, India. Each interview lasted two hours on average, and at
least two researchers attended each meeting. Respondents were asked to describe their
experience with the think3 R&D lab first, to highlight the challenges they faced during the
very initial phase of the Indian operations, and their evolution over time. Then, respondents
were asked to recall the process that led to the recognition of the opportunity that formed the
basis of the TDF business. Massimo Signani and two operators have been key informants
on this phase, because of their deep involvement throughout the whole process from
conception and launch of the new business. Finally, our key informants were asked to
highlight their experience with TDF, with special attention to its relationship to think3 as a
software house, from both a strategic and an organizational point of view. We used semi-
structured interviews and left room for open comments. While some degree of extrapolation
from the story-telling of the key informant has been necessary to isolate the elements crucial
to the opportunity recognition process, it is fair to acknowledge that two of our respondents
had been salient in recognizing the new opportunity, as they were directly involved in the
process.
In order to triangulate our data and to corroborate further our findings by sourcing
empirical evidence from heterogeneous data sources, we examined numerous documents,
such as balance sheets, quality manuals, meeting excerpts, internal memos and consul-
tants’ reports. Moreover, we collected approximately 150 online press releases involving
think3, spanning the period 2000–2007.
In the following section, before looking at the factors that were likely to affect the
identification of the new TDF opportunity, we provide information about the company and its
initial offshoring experience in India. We then present the TDF business model with the
intent to illustrate: (a) that the TDF opportunity was eventually implemented, and (b) how the
TDF opportunity links with the current business. We do not go into the details of the process
leading to the implementation of this business model, since our focus is on opportunity
identification.
Leveraging Offshoring 399
Dow
nloa
ded
by [
Uni
vers
ity o
f M
aast
rich
t] a
t 13:
15 2
2 Ja
nuar
y 20
15
The Case of think3
Company Overview
think3 was established in Bologna, Italy, in 1979 by two young engineers and a professor
from the University of Bologna, who recognized a business opportunity from matching the
increasing demand for computer-aided mechanical design with their competencies in the
field of digital graphic simulation.
think3 provides small–medium manufacturing companies with a unique set of software
solutions, which includes an integrated product development environment for 2D and 3D
CAD (computer-aided design), PDM (product data management), PLM (product life cycle
management) and surface and solid modelling. In 1997, the firm decided to go international,
for two basic reasons: to expand the market beyond Italy’s borders and to trigger the
continuous technological upgrading by co-localizing with worldwide technology leaders in
Silicon Valley. Hence, the headquarters moved to Santa Clara, California. The US relocation
did not foster the expected US market growth. US customers appeared to be very much
locked-in with local software leaders, and the establishment of a strong market presence
turned out to be difficult. Nowadays, the core centres of think3’s R&D activities are spread
across Italy, France and India. Even though think3 has a commercial presence nearly all
over the world, the more crucial market areas are Italy, Germany, Japan and, with increasing
importance, India.
The Experience in India (2000)
The experience in India started in 2000, when think3 decided to offshore part of its R&D
activities to Bangalore, through the establishment of a local proprietary centre. At that time
the company was mainly looking to access: (a) skilled local personnel to develop its software
solutions at low cost; (b) new markets.
The company faced various problems while opening the new captive centre in India,
including difficulties preparing all the bureaucratic documentation needed to start up a new
activity, obtain visas, acquire the appropriate facilities, rent the buildings for the new offices,
etc. It took approximately four years to overcome these initial difficulties and to learn how to
deal smoothly with the local domain. This resulted in a very modest growth over the first
three years, which improved significantly only at the end of the fourth year, when some key
organizational changes were implemented to meet the local culture and expectations.
More specifically, the initial organizational structure tended to replicate the Italian
model, exporting to India the same incentive scheme and leadership style that had been
successful in Italy. The offshoring strategy was based on the delocalization of repetitive,
low knowledge-intensive activities of software development (e.g. debugging activities).
Following a drop in employees from 25 in 2000 to 9 in 2004, the management realized that
something was wrong with the model they had been implementing.
On the organizational dimension, the management had to acknowledge the
unsuitability of a “flat” organizational structure, traditionally deployed in a Western context
in order to promote innovation and creativity in the IT sector. Within the Indian context,
however, people appear to derive important stimuli from a well-defined hierarchical
structure. To find incentives towards hard work and towards increasing productivity levels,
Indian engineers require hierarchical roles, where vertical relations are clear, and where the
400 F. Angeli & R. Grimaldi
Dow
nloa
ded
by [
Uni
vers
ity o
f M
aast
rich
t] a
t 13:
15 2
2 Ja
nuar
y 20
15
who-reports-to-whom framework is sharply defined. Considering cultural differences
between Italy and India, Rama, an Indian TDF team leader, observes:
[ . . . ] There is a working cultural difference in Italy, there’s a fear of competition. Definitely such
issues are there which are clearly visible. But at the end the fittest is the one who survives, if you
work on, work better things, definitely we should be able to win, that’s what the technique is. We
have to work—work harder, work smarter, work better, that is the reason with which we are going.
If that is there, definitely there will not be any issues . . . (Rama, TDF team leader)
On the technical dimension, the management figured out that the steady delocalization
of the least creative and challenging part of software development failed to motivate the
ambitious and eager-to-learn Indian engineers. In order to find incentives in day-to-day
work, a visible evolution in the understanding of the final product was needed.
Several changes were put in place to address these problems. First, in 2004 the
Bangalore centre was placed under Indian management, which changed the organizational
form towards a more hierarchical structure in order to comply with what the Indian engineers
sought from their experience with think3. Renewing the local management was an important
turning point for think3, since it enabled the company to be much more effective and to grow
significantly, along with a deeper understanding of Indians’ professional needs. The Indian
management set up a performance-based award system, institutionalizing awards such as
the “employee of the month”, or group activities like the “think3 day” to enhance team
building. It increased the number of professional layers and defined the career paths and
the job positions more sharply. These elements suited the way Indian employees seek
individual visibility, reputation-related recognition and collective acknowledgment of
hierarchical role. Today, think3 India is considered as an:
[ . . . ] Indian company. We have tried to keep a certain value system, a certain culture, which was
Indian. Our HR policies, how we treat individuals, are very related to what is being done in India
. . . (Ram, Managing Director, think3 India)
Secondly, the activities “offshored” to Bangalore became increasingly knowledge-
intensive, following a well-defined evolutionary path. From the initial offshoring of software
debugging or simple conversion activities, the Indians started an active participation in
the design and development of the software (CAD) system, gaining responsibility for
increasingly wide segments of code. As Rama puts it:
[ . . . ] See, initially when we started, we did not take total responsibility for any part of the product.
We were small teams here working under the direct supervision of a team in Italy or the US, so we
were really a joint team, so directions if not on a daily basis at least on a weekly basis would come
from the team sitting outside the country and that was very logical because we were a new team,
we had to understand the product, we had to understand how the product was set up. There were
20 years of technology and experience sitting in people outside the country. So, all that had to get
slowly transferred. So, initially it made a lot of sense that the teams in India were just working
under the supervision of teams outside. Over a period of time, as knowledge got transferred,
as the engineers in India got more experienced, understood how our product was structured,
Leveraging Offshoring 401
Dow
nloa
ded
by [
Uni
vers
ity o
f M
aast
rich
t] a
t 13:
15 2
2 Ja
nuar
y 20
15
we then started taking the responsibility for certain specific functionalities or certain modules of
the product . . . (Ram, Managing Director think3 India)
Today, after nine years, the R&D centre in Bangalore counts about 180 employees and
constitutes 40 per cent of think3’s global R&D. According to the Italian management of
think3, the bases for this incredible growth rate have been the major roles played by the
initial will and then by the ability to integrate with the local culture (to understand it, to
appreciate and to learn the positive aspects).
A Brand New Business: The Design Factory (2004)
Four years after the initial establishment in India, the company decided to enter a brand new
business. By the end of 2005, think3 started providing its Western customers with
mechanical engineering services, leveraging the outsourcing formula through the
competencies of Indian mechanical engineers. The brand new business is called The
Design Factory (TDF); a design factory (DF) is typically organized as a group of mechanical
engineers who work exclusively on an engineering project for a customer in Europe. People
within TDF are completely devoted to that project and are located in the think3 site in
Bangalore. TDF’s customers tend to reconfirm the collaboration with the designer/s, and are
thus willing to establish a medium to long-term relationship.
As Anupam (TDF Head) describes it:
[ . . . ] TDF is an acronym, which is coined as The Design Factory as we call it. We have a good
customer base because of our organization, particularly in Europe especially with focus on Italy, we
have a large, good marketing and sales team which knows the customer base there. The idea is that
we can position services from India with the India advantage story, to these customers, and then we
can transfer this work back to India. The focus was to avoid working on short-term projects and
to work on long-term projects; hence, most of the projects or the customer assignments or
engagements run typically for more than one year, that’s the kind of engagement model. The
concept is more like an extended design team for them in India, so the value chain creation is
something, which is driven by the customer . . . (Anupam, TDF Engineering Services Head)
The very first input to TDF’s business formula comes from Western companies’
requirements, from the definition of the resources that they are willing to invest and their
time constraints. On this basis, think3 is able to select, through the local Indian network,
the Indian engineers who, potentially, can best fit the clients’ requirements.
Video conferences are used to introduce the Indian engineers to the European clients,
who, together with think3, make the final decision about the staff to hire. Drawing on its local
network, in the recruitment phase think3 can provide its clients with up to 10 CVs of potential
candidates, from which to pick the most suitable people. After this first selection, Indian
candidates visit the client for a period ranging from two to six months, during which they
become familiar with the project(s) on which they are intended to work, before going back to
India, where they will be working on a stable basis. Once the choice has been made, think3
hires permanently the Indian employee(s), who are then allocated full time on the European
client project until completed. TDF thus acts as a broker between the Western European firm
and the Indian engineers accomplishing the outsourced task.
402 F. Angeli & R. Grimaldi
Dow
nloa
ded
by [
Uni
vers
ity o
f M
aast
rich
t] a
t 13:
15 2
2 Ja
nuar
y 20
15
The outsourcing formula offered by TDF is crafted to the specific needs of
manufacturing SMEs, since it embeds the solutions to several problems (like the important
initial investment to set up proprietary local infrastructures and/or the lack of knowledge
about local cultures, institutions and key players, as well as governmental regulations).
Beyond the direct success of TDF as a separate new business, additional fruitful
synergies between TDF and think3’s main business as a software house need to be pointed
out. Though sharing the same spaces, the two organizations are very well distinguished, first
by the profile of the employees: software engineers and developers (in the case of think3);
and mechanical engineers and designers (in the TDF case). They can be seen as sequential
in the software value chain:
[ . . . ] The think3 software guys develop the product, the TDF guys use the product. So one
group are the developers, the other group are the designers . . . (Ram, Managing Director, think3
India)
TDF is considered as a proper external customer:
[ . . . ] The TDF guys are treated as a customer, so if there’s an issue which they’re facing working
with thinkdesign they would go through the customer care process . . . (Ram, Managing Director,
think3 India)
Figure 1 illustrates the strategic role that TDF has within think3 corporate strategy. TDF
adds to the overall organization at two different levels. The developers working for think3
India, software engineers, provide the customers with the design tool (software solutions for
engineering), while the designers working for TDF, also located in India, provide the same
customer base with the design expertise. Thus, on the inter-organizational, customer-
related level, TDF sets up a new diversified business, which completes and enriches the
offer of the CAD design product. At the same time, on the intra-organizational level, TDF is
located downstream in the software product value chain. The organizational and physical
vicinity of the two teams fosters the possibility of exchanging bi-directional feedback: the
TDFDesigners
THINK3 INDIADevelopers
DesignExpertise
DesignTool
CUSTOMERS
Figure 1. TDF within think3 corporate strategy
Leveraging Offshoring 403
Dow
nloa
ded
by [
Uni
vers
ity o
f M
aast
rich
t] a
t 13:
15 2
2 Ja
nuar
y 20
15
designerscan improve their knowledge about the tool by learning directly from the developers;
the developers can benefit from direct feedback about problems in the usage of the software.
The TDF model has been successfully implemented and has been growing dramatically
over time. In 2007, TDF counted 110 Indian mechanical engineers dedicated to 53
customers, 80 per cent of which are Italian manufacturing SMEs. This business constitutes
10 per cent of the company’s overall turnover, though its share of turnover is growing at a
double-digit pace.
Determinants of Opportunity Recognition
According to the management of think3 Italy, the development of TDF has been triggered by
the identification of an opportunity, which was correlated to think3’s mainstream business
as a software house, and which could further enhance it. think3 came to envisage and
conceptualize the new opportunity by matching the availability of mechanical engineers in
the offshore context with the increasing demand coming from manufacturing SMEs in the
Western countries.
The evidence that we provide in this section shows that, in line with the theory that
we illustrated above (Eriksson et al., 1997), the identification of the new business
opportunity and the conception of a successful formula have leveraged three main factors:
(1) experiential knowledge of the market, clients and competitors (foreign business
knowledge); (2) experiential knowledge of the offshore context (foreign institutional
knowledge); (3) experiential knowledge about internationalization (international knowledge).
Experiential Knowledge of the Market, Clients and Competitors
think3 has served European manufacturing SMEs for over 30 years, “enabling more than
11,000 companies over time to achieve unmatched results in terms of product
innovativeness and rapid time to market by optimizing their product development process”
(Silvano Joly, Worldwide Marketing Vice-President, think3). think3 offers 3D CAD and PLM
software solutions for industrial design in a variety of segments, such as automotive, bottling
machinery, furniture, household appliances, medical devices and packaging machinery, all
specifically targeted to SMEs.
Over the years, think3 has accumulated technological and system integration
knowledge to understand companies’ requirements. The company has leveraged the
unrivalled possibility of acquiring knowledge relating to the way its product was being used
by client companies and of absorbing architectural and functional information about the
products being developed by users of its CAD software. Furthermore, the implementation of
PLM software solutions within the customers’ organizational context has provided think3
with a difficult-to-imitate knowledge of how typical Italian SMEs organize their own internal
processes. All these factors contributed to the recognition of the new business opportunity.
Massimo Signani underlines:
[ . . . ] Over the years, we have come to develop deep knowledge about our clients, European
SMEs. By crafting our product on their engineering activities, through an ongoing process of
refinement, we came to develop a very close knowledge of their internal processes and of the
competencies and skills they need to optimize the use of our product. This was a sort of inspiration
404 F. Angeli & R. Grimaldi
Dow
nloa
ded
by [
Uni
vers
ity o
f M
aast
rich
t] a
t 13:
15 2
2 Ja
nuar
y 20
15
to us for the TDF. Hadn’t we had such a knowledge we would have probably never come up with
the new idea . . . (Massimo Signani, Vice-President and Head of Engineering Services, think3)
Working in direct contact with over 11,000 manufacturing SMEs for over 30 years,
think3 has witnessed the birth and fast development of these companies’ outsourcing—and
specifically offshore outsourcing—needs. As Joe Costello pointed out in 2005:
[ . . . ] Based on my company’s quarter of a century of experience in providing product design and
development services to small and mid-sized manufacturing and design firms, it has become clear
that outsourcing, rather than a major competitive threat, is instead a major source of competitive
strength [ . . . ]. Focusing the discussion of outsourcing primarily on large corporations misses the
point. While offshore outsourcing may bolster the bottom lines of the largest corporations, it is
becoming a strategic necessity for many of the 229,000 companies in the mid-market in America . . .
(Joe Costello, Chairman and CEO, think3—in interview conducted by Lawrence Kren (2005))
The knowledge of the clients and the proximity to their needs has secured a preferential
channel for think3 to spot the opportunity and to craft a business model able to tackle the
opportunity.
Additionally, the identification of the TDF business formula has leveraged the
knowledge of potential competitors. Potential competitors in the home country are
engineering bureaus, EBs (of which about 4,000 exist, over all of Italy), with a long tradition
and expertise in the local environment and of innovation dynamics of SMEs. Nevertheless,
EBs are small organizations, with a limited supply potential as compared to TDF, which can
hire virtually any number of Indian engineers to satisfy home demand. Moreover, within EBs
a few professionals handle many projects at a time, whereas in the TDF model the customer
firm is provided with a team of exclusively dedicated engineers. This triggers a final outcome
of higher quality, which leverages a deeper and more trustful relationship between
customers and engineers. Beyond EBs, our respondents also pointed out that traditional
software houses, such as think3, can play an intermediary role and can set up a solution like
TDF’s. However, traditional software houses are mainly US multinationals, with neither the
experience nor the reputation with European SMEs. Likewise, branded Indian outsourcing
companies, such as Infosys or Infotech, offer high-quality and reliable engineering services,
but lack any commercial or technical expertise with European SMEs’ internal manufacturing
processes. On the other hand, the web-based Indian outsourcing companies offer extremely
cheap services but lack reliability. The knowledge of TDF’s potential competitive scenario
allowed think3 to conceive a business formula able to ensure sustainability and competitive
advantage over time.
As Massimo Signani pinpoints:
[ . . . ] The knowledge of our customers helped us to define the competitors and to understand the
competitive scenario at large. This has been crucial for the conception of TDF, to identify what to do
and how to do it; moreover, competitive analysis strengthened our belief in the sustainability of our
business formula . . . (Massimo Signani, Vice-President and Head of Engineering Services, think3)
Leveraging Offshoring 405
Dow
nloa
ded
by [
Uni
vers
ity o
f M
aast
rich
t] a
t 13:
15 2
2 Ja
nuar
y 20
15
Experiential Knowledge of the Offshore Context
In 2004, think3 was settled in Bangalore, with established operations, a workforce of 100
engineers and a successful Indian management. A network of local Indian commercial
partners (value-added resellers—VARs) was starting the commercial penetration of think3’s
software solutions all over India. Partnerships with universities and educational institutions
were further enhancing think3’s embeddedness in the local domain. Through “thinkstart”,
think3’s educational programme, the company was increasingly partnering with schools and
universities to train the next generation of product design and development professionals
in the use of think3’s innovative industrial design technology. Through its operations, its
network of VARs and its educational programme, think3 grew aware that India could offer
highly skilled mechanical engineers able to satisfy the growing demand for offshore
outsourcing engineering coming from Western manufacturing SMEs. Drawing on its
consolidated and widespread local Indian network, think3 could easily access local
institutions and universities. Moreover, its local Indian management was committed to local
recruitment and benefited from preferential access to possible sources of competencies
(trained and specialized engineers).
The offshore network also allowed think3 to gain deep insight into the system of values,
lifestyle, religious and ethnic peculiarities, institutional framework and social fabric of the
Indian context in Bangalore. This knowledge has been crucial in the recognition of the new
business ideas. Leveraging this, the management realized that a solution like TDF could be
most appealing to Indian mechanical engineers, as it combined the prestige of working for a
MNE the challenge of a highly technology-intensive job in mechanical engineering, the
possibility to learn from projects in several different business domains and the ease of
remaining in India with the prospect of travel to Europe for short periods.
As Massimo Signani highlights:
[ . . . ] It is important to underline that the embeddedness in the Indian context is among the
elements that have led to the conception of TDF and to the consolidation of ideas around
its feasibility and sustainability. Our experience in Bangalore has produced a fine-grained
knowledge about the Indian environment there, in terms of institutions, governmental
bureaucracy but also cultural norms, system of values, education system, everyday Indian
lifestyle according to religious and ethnic differences. This rich knowledge has strengthened our
confidence that TDF could be possible and very profitable . . . (Massimo Signani, Vice-President
and Head of Engineering Services, think3)
Experiential Knowledge about Internationalization
The experiential knowledge deriving from previous internationalization experience of think3
provided a strong input to the opportunity recognition and to the conception of the new TDF
business model. The knowledge acquired through the trial-and-error process that led think3
to establish a successful R&D lab in Bangalore has become the core value of TDF’s formula.
This experiential knowledge is embodied into two main elements: (1) the ability to promote
offshore cultural integration and (2) the ability to align home and offshore operations.
Ability to promote offshore cultural integration. The key turning point of the strategy
implemented by think3 during its internationalization process has been the promotion of a
406 F. Angeli & R. Grimaldi
Dow
nloa
ded
by [
Uni
vers
ity o
f M
aast
rich
t] a
t 13:
15 2
2 Ja
nuar
y 20
15
much deeper cultural integration, achieved through the switch to an Indian management for
the Indian R&D lab, which we described in a previous section. This allowed think3 to cope
with potentially dangerous cultural clashes. In particular, Indian management’s perspective
enabled the firm to gain precious insight into the peculiar Indian system of values, and to
understand the Indian need for a sharp definition of hierarchy, for a careful and visible
system of performance evaluation, and for a rapid professional growth in terms of roles and
responsibilities. By coupling these with the international exposure, reputation and cutting-
edge technology, think3 could provide Indian engineers with the proper incentives system
and a suitable cultural environment.
The cultural integration achieved by think3 in the offshore context, prior to identifying the
new TDF opportunity, witnesses the formation at the organizational level of the capability to
understand the local context in a broad sense, and to adapt to it rapidly. This capability does
not appear to be situation-specific and can be considered as a precious element of
experiential knowledge about internationalization:
[ . . . ] By becoming embedded in the Indian context, we developed new knowledge about the
crucial mechanisms and factors enabling the understanding of—and the adaptation to—any local
foreign environment, such as the need to evolve with the local context, to understand the
institutional environment, to evaluate the local norms and systems of values. This has been a
lesson, which has helped us to develop a mindset about how to approach internationalization
and benefit from the opportunities it offers . . . (Massimo Signani, Vice-President and Head of
Engineering Services, think3)
Indeed, the effort towards cultural integration enhanced the embeddedness in the local
context already established through the network of relationships and was an important
element for opportunity recognition. In order to achieve a successful offshoring, the
“Indianization of the product”, as Massimo Signani puts it (IlSole24Ore, 2007), is crucial for
TDF. India retains cultural and environmental differences that not only must not be overlooked
for a successful offshoring but also need to be leveraged. As an example, Signani considers
the differences in raw materials and manufacturing processes, which, through an
experienced usage and understanding, allows the same component to be produced faster
and cheaper. With TDF’s offer package, the customers purchase the Indian design
capabilities and the appropriate interface to make them profitable, with the local knowledge,
the cultural filters and the appropriate professional incentives already set up and optimized.
Ability to align home and offshore operations. Along with the strong effort to promote local
embeddedness and Indianization of the operations and of the product, think3 has been
constantly engaged in the alignment between home and offshore operations. Western
employees have been encouraged to get to know their Indian counterpart through frequent
visits to Indian operations, and face-to-face meetings with the Indian employees at the
Western sites. The integration between Western and Indian engineers is further enhanced
by enriched communication channels, which encompass instant messaging, videoconfer-
ence, phone and browser-based video for peer-to-peer communication.
This environment favoured the technical tuning between home and offshore operations.
think3’s trial-and-error approach, developed as a software house during its early
Leveraging Offshoring 407
Dow
nloa
ded
by [
Uni
vers
ity o
f M
aast
rich
t] a
t 13:
15 2
2 Ja
nuar
y 20
15
internationalization, brought the company to recognize the importance of promoting an
evolution of the level of complexity of outsourced tasks, from simple to more broad and
complex projects. The progressive evolution of offshored tasks and the constant alignment
between home-based knowledge and offshore knowledge have become a best practice
within think3’s software house, since it engenders a mutually reinforcing virtuous cycle: Indian
mechanical engineers have the chance to learn and increase their own technical knowledge,
while Western engineers have the time to build trust towards Indian capabilities. On the one
hand, Indians are more and more challenged and motivated by daily work, which minimizes
the risk of resignation and attrition; on the other hand, Westerners can rely on cheaper, skilled
resources with a longer term perspective, which benefits the quality and rate of innovation.
This ability to integrate and progressively align home and offshore operations can be
considered an important piece of experiential knowledge of the internationalization
experience, which, like the ability to promote cultural integration, is not context-specific but
constitutes a new ability at organization level. As Signani puts it:
[ . . . ] The alignment of home and offshore operations has been critical in the internationalization
process of think3. We understood that we not only had to consider the local needs and to pursue
cultural embeddedness in the Indian context, but also to let the home organization co-evolve and
pace the change. Our experience with the R&D lab in Bangalore has taught us the importance of
the constant tuning between home and abroad . . . (Massimo Signani, Vice-President and Head
of Engineering Services, think3)
Through the constant tuning of technical skills, the enhanced communication
techniques and the face-to-face meetings, think3 has developed a particular sensitivity
and scanning attitude toward the evolution of Indian technical competencies over
time. This has played an essential role in successfully envisaging the new opportunity and, at
the operational level, in subsequently recruiting the mechanical engineers for TDF’s service.
Discussion and Conclusions
With our study, we advance a preliminary contribution that lies at the intersection of different
streams of works, including the literatures on the offshoring of intangibles, on the
internationalization processes and on opportunity recognition. Provided that the
contributions on opportunity recognition are individual-based, our focus on a small
entrepreneurial firm, and on SMEs more generally, is instrumental. Given the small size of
these companies we expect some degree of overlap between organizational dimensions
and individual-level ones, which is relevant for a study that looks at opportunity recognition
processes.
Hence, our preliminary evidence provides a theoretical and empirical contribution to the
literature on opportunity recognition in international settings. As we mentioned, both the
international entrepreneurship (IE) and the international entrepreneurial dynamics (IED)
literature acknowledges the relevance of opportunity recognition in international settings.
Yet, neither perspective has looked in detail at the process through which new opportunities
are identified. Our evidence seems to suggest that opportunity identification is the outcome
of a bottom-up process, which, rather than being planned in detail in advance, involves
408 F. Angeli & R. Grimaldi
Dow
nloa
ded
by [
Uni
vers
ity o
f M
aast
rich
t] a
t 13:
15 2
2 Ja
nuar
y 20
15
interpreting possible matches between pre-existing means (resources, skills, new
technologies) and new ends (international markets), in a problem-solving process.
There is consensus that prior knowledge is relevant for opportunity identification
(Shane, 2000). In line with previous studies (Eriksson et al., 1997; Johanson and Vahlne,
2006), our findings support the idea that three types of prior knowledge have constituted the
trigger to opportunity identification in think3: foreign business knowledge (knowledge of
clients, markets and competitors), foreign institutional knowledge (knowledge of the offshore
context, including country legislation, culture and local characteristics) and internationaliza-
tion knowledge.
After analysing our preliminary evidence, we feel comfortable in saying that the three
processes of experiential knowledge accumulation are likely to have played an important
role in the opportunity recognition process. With regard to internationalization knowledge, in
line with the contribution by Eriksson et al. (1997), our evidence suggests that accumulated
experiential internationalization knowledge may have exerted a positive influence on the
further internationalization of think3. Such internationalization knowledge is embodied in the
firm-specific capabilities to become integrated into the offshore cultural context and to align
the home and offshore operations. The local activities of the firm in an emerging market
economy are nonetheless likely to create opportunities for spillovers. The extent to which
firms and locations can benefit from the entrepreneurial value proposition that they create
depends on the extent to which the key creative and knowledge assets are embedded within
the organizational and geographical boundaries, and therefore resistant to imitation by rivals
in competing locations (Mudambi, 2008).
The ability to integrate into the offshore cultural environment can be expressed in terms
of sensitivity towards the local requirements, alertness to the clues coming from the
surrounding environment, openness towards the new foreign offshore context, and
willingness to adapt and embed rapidly into it. Such an ability to embed into a new foreign
context is not specific to TDF, but it is an ability that think3 has developed in its previous
internationalization experience. It turned out to be relevant for the identification of the brand
new TDF business opportunity, for envisaging new means–ends relationships. This ability
consists in obtaining intuition about new potential recombinations of resources (home and
local ones) to best address specific market needs.
Similarly, the internationalization experience of think3 as a software house has
underlined the importance of a constant alignment between the home and offshore
operations. Along with pursuing a strong cultural embeddedness in the foreign context and
promoting adaptation, the company had simultaneously to foster the co-evolution between
the knowledge at home and the knowledge content of the offshored tasks. This factor is of
particular relevance when considering offshoring of knowledge-intensive activities such as
R&D, where the interdependence between tasks is high (Kumar et al., 2009) and the
constant alignment of home and offshore operations is crucial. Moving from the specific
internationalization case, the need to align home and offshore operations has been
elaborated upon and has become a firm-specific ability, which in our view was crucial for
envisaging the new TDF opportunity.
This work also contributes to a recent stream of works in the offshoring literature. We
bring evidence on firms’ offshoring processes and on the factors that trigger their evolution
over time. The shift from selling design software, to selling the expertise to use the design
software represents an example of “further R&D offshoring”, which started within a
Leveraging Offshoring 409
Dow
nloa
ded
by [
Uni
vers
ity o
f M
aast
rich
t] a
t 13:
15 2
2 Ja
nuar
y 20
15
company’s ongoing offshoring activities. Therefore, as well as providing access to skilled
resources at low costs, offshoring processes might offer concrete new insights for strategic
business evolution and therefore affect companies’ growth in the short as well as in the long
run. More generally offshoring is making its way up the value chain. Offshoring of high-value
activities appears to be driven not only by cost-saving needs, but also by a global sourcing-
of-knowledge rationale, and is deemed to be a novel way to undertake internationalization
(Maskell et al., 2006).
Our findings also advance the knowledge accumulated by recent studies on the
dynamic perspective of next-generation offshoring (Manning et al., 2008), emphasizing the
importance of becoming embedded into the local context, learning from international past
experience and dynamically adapting to rapidly changing offshoring environments and
opportunities. In line with these studies we show how the successful generation of global
innovation might require offshoring companies to be able to redeploy, integrate, build, and
reconfigure internal and external competencies to address rapidly changing environments
(Manning et al., 2008).
Taken together, these considerations pave the way for future research on opportunity
recognition in international settings. In particular, we invite researchers to develop theoretically,
and investigate empirically, a comprehensive framework that underlines the different types of
antecedents of opportunity recognition at international level and the relationships between
them. The extant literature agrees that the international experience of entrepreneurial
companies influences their international outlook and the evolution of firms’ internationalization.
Yet, more is to be discovered about the various dimensions of international experiential
knowledge, how it may be linked to the concept of global vision, and how it coincides with typical
ways of discovering and connecting geographically dispersed skills, knowledge, resources and
customers (Zahra, 2005; Mathewsand Zander,2007), intonew businessopportunities forsmall
and medium-sized companies.
Limitations and Future Research Directions
The main limitation of this study relates to the generalizability of our results, particularly
because of the use of one single case. Literature supporting single case usage highlights the
fruitful fine-grained detail that can be achieved through the deep investigation of one single
company (Langfield-Smith and Greenwood, 1998; Adler et al., 1999). On this line, we tried to
guarantee richness of data by making use of multiple heterogeneous data sources (open
interviews, archives, press releases). Meanwhile, we gave strong emphasis to the point of
view of the people mostly involved in the phase of opportunity recognition, which is
recognized to be predominantly an individual process, and thus requires deep, fine-grained
data on the individual perceptions.
An additional characteristic of this study affecting generalizability relates to the specific
context. We studied the process of opportunity identification by SMEs in international
settings. The study of opportunity recognition at firm level instead of individual level has
been possible because of the small size of the firm, and because of the bottom-up nature of
the process. These two elements entail significant differences between the phenomenon
under observation and the dynamics of opportunity recognition occurring within MNEs.
Thus, caution should be used in generalizing our results to other contexts, and especially
to MNEs.
410 F. Angeli & R. Grimaldi
Dow
nloa
ded
by [
Uni
vers
ity o
f M
aast
rich
t] a
t 13:
15 2
2 Ja
nuar
y 20
15
Also we know that firms may have an important role in creating the conditions leading
and fostering their employees to discover new opportunities. Krueger (2000) highlights
the importance for organizations to develop a “supportive” cognitive infrastructure. The
cognitive infrastructure should enhance perceptions in organization members that
opportunity seeking is personally and socially desirable, and that members are personally
and collectively competent to pursue new opportunities. Such a cognitive infrastructure
would provide the empowerment needed to promote opportunity seeking and eventually
opportunity development. We thus believe it is important for future research to address the
characteristics of the context in which individuals are settled at the time they happen
to discover new opportunities, and the role that organizations may have in triggering such
processes.
Overall, this paper sheds light on the evolution of international activities of SMEs within
their ongoing offshoring activities. We still believe that further research should be devoted to
addressing more generally growth and evolution dynamics of SMEs at the international
level. These dynamics differ from those of large established companies and need to be
addressed through a different lens, with greater focus on the trial-and-error, informal,
bottom-up processes that drive them, with the objective of understanding which factors
come into play during these processes and are relevant for their success.
Acknowledgements
The authors owe special thanks to Elisa Mattarelli, for the in-depth interviews she ran in
India. The authors also express their appreciation to think3 and to all respondents who
participated in this study and to Dr Paul G. Ellis for the editorial assistance.
References
Adler, P. S., Goldoftas, B. and Levine, D. I. (1999) Flexibility versus efficiency? A case study of model changeovers in the Toyota
production system, Organization Science, 10(1), pp. 43–68.
Agrawal, V., Farrel, D. and Remes, J. K. (2003) Offshoring and beyond [Special edition: Global directions], The McKinsey Quarterly,
pp. 25–35.
Alvarez, S. A. and Barney, J. B. (2008) Opportunities, organizations, and entrepreneurship, Strategic Entrepreneurship Journal, 2(4),
pp. 265–267.
Andersson, U., Forsgren, M. and Holm, U. (2002) The strategic impact of external networks: subsidiary performance and competence
development in the multinational corporation, Strategic Management Journal, 23(11), pp. 979–996.
Ardichvili, A., Cardozo, R. and Ray, S. (2003) A theory of entrepreneurial opportunity identification and development, Journal of Business
Venturing, 18, pp. 105–123.
Arino, A. and de la Torre, J. (1998) Learning from failure: towards an evolutionary model of collaborative ventures, Organization Science,
9(3), pp. 306–325.
Asmussen, C. G., Pedersen, T. and Dhanaraj, C. (2009) Host-country environment and subsidiary competence: extending the diamond
network model, Journal of International Business Studies, 40, pp. 42–57.
Bardhan, A. D. (2006) Managing globalization of R&D: organizing for offshoring innovation, Human Systems Management, 25,
pp. 103–114.
Carmel, E. and Agarwal, R. (2002) The maturity of offshore sourcing of IT work, MISQ Executive, 1(2), pp. 65–77.
Chandra, Y., Styles, C. and Wilkinson, I. (2009) The recognition of first time international entrepreneurial opportunities: evidence from
firms in knowledge-based industries, International Marketing Review, 26(1), pp. 30–61.
Leveraging Offshoring 411
Dow
nloa
ded
by [
Uni
vers
ity o
f M
aast
rich
t] a
t 13:
15 2
2 Ja
nuar
y 20
15
Cohen, M. W. and Levinthal, D. A. (1990) Absorptive capacity: a new perspective on learning and innovation, Administrative Science
Quarterly, 35, pp. 128–152.
Couto, V., Mani, M., Lewin, A. Y. and Peeters, C. (2006) The Globalization of White-Collar Work, Duke University and Booz Allen Hamilton
(Durham, NC: Duke CIBER).
De Koning, A. (1999) Conceptualizing Opportunity Recognition as a Socio-cognitive Process (Stockholm: Centre for Advanced Studies in
Leadership).
De Rond, M. and Bouchikhi, H. (2004) On the dialectics of strategic alliances, Organization Science, 15(1), pp. 56–69.
Di Gregorio, D., Musteen, M. and Thomas, D. E. (2009) Offshore outsourcing as a source of international competitiveness for SMEs,
Journal of International Business Studies, 40, pp. 969–988.
Doh, J. P., Bunyaratavej, K. and Hahn, E. D. (2009) Separable but not equal: the location determinants of discrete services offshoring
activities, Journal of International Business Studies, 40, pp. 926–943.
Doz, Y. L. (1996) The evolution of cooperation in strategic alliances: initial conditions or learning processes, Strategic Management
Journal, 17(Summer), pp. 55–83.
Dutta, A. and Roy, R. (2005) Offshore outsourcing: a dynamic causal model of counteracting forces, Journal of Management Information
Systems, 22(2), pp. 15–35.
Eisenhardt, K. M. (1989) Building theories from case studies research, Academy of Management Review, 14(4), pp. 532–550.
Eriksson, K., Johanson, J., Majkard, A. and Sharma, D. D. (1997) Experiential knowledge and cost in the internationalization process,
Journal of International Business Studies, 28(2), pp. 337–360.
Feinberg, S. E. and Majumdar, S. K. (2001) Technology spillovers from foreign direct investments in the Indian pharmaceutical industry,
Journal of International Business Studies, 32(3), pp. 421–437.
Grimaldi, R. and Grandi, A. (2003) Exploring the networking characteristics of new venture founding teams: a study of Italian academic
spin-offs, Small Business Economics, 21(4), pp. 329–341.
Grimaldi, R., Mattarelli, E. and Tagliaventi, M. R. (2009) Necessity is the mother of invention: the role of professional identity in the
evolution of offshoring of high-value activities. Working Paper, Department of Management, University of Bologna, Italy.
Hills, G. E. (1995) Opportunity recognition by successful entrepreneurs: a pilot study, in: Frontiers of Entrepreneurship Research,
pp. 103–121 (Wellesley, MA: Babson College).
Hoffmann, W. H. (2007) Strategies for managing a portfolio of alliances, Strategic Management Journal, 28, pp. 827–856.
IlSole24Ore (2007) Globtalk/Ho assunto un ingegnere di Bangalore, IlSole24Ore.com, il Blog di Job24. Available online at: http://jobtalk.
blog.ilsole24ore.com
Johanson, J. and Vahlne, J. E. (1977) The internationalization process of the firm: a model of knowledge development and increasing
foreign market commitment, Journal of International Business Studies, 8(1), pp. 23–32.
Johanson, J. and Vahlne, J. E. (2006) Commitment and opportunity development in the internationalization process: a note on the Uppsala
internationalization process model, Management International Review, 46, pp. 165–178.
Jones, M. V. and Coviello, N. E. (2005) Internationalization: conceptualizing an entrepreneurial process of behaviour in time, Journal of
International Business Studies, 36, pp. 284–303.
Kenney, M., Massini, S. and Murtha, T. P. (2009) Offshoring administrative and technical work: new fields for understanding the global
enterprise, Journal of International Business Studies, 40, pp. 887–900.
Kirzner, I. (1973) Competition and Entrepreneurship (Chicago: University of Chicago Press).
Koza, M. P. and Lewin, A. Y. (1999) The coevolution of network alliances: a longitudinal analysis of an international professional service
network, Organization Science, 10(5), pp. 638–653.
Kren, L. (2005) Interview with Joe Costello, Chairman and CEO, think3, 6 January. Available online at: http://machinedesign.com/article/
offshore-outsourcing-is-both-inevitable-and-a-source-of-us-manufacturing-strength-0106.
Krueger, N. F., Jr. (2000) The cognitive infrastructure of opportunity emergence, Entrepreneurship Theory and Practice, 24(3), pp. 5–23.
Kumar, K., van Fenema, P. C. and von Glinow, M. A. (2009) Offshoring and the global distribution of work: implications for task
interdependence theory and practice, Journal of International Business Studies, 40, pp. 642–667.
Langfield-Smith, K. and Greenwood, M. R. (1998) Developing co-operative buyer–supplier relationships: a case study of Toyota, Journal
of Management Studies, 35, pp. 331–353.
Lee, T. W. (1999) Using Qualitative Methods in Organizational Research (Thousand Oaks, CA: Sage).
Levy, D. L. (2005) Offshoring in the new global political economy, Journal of Management Studies, 42(3), pp. 685–693.
412 F. Angeli & R. Grimaldi
Dow
nloa
ded
by [
Uni
vers
ity o
f M
aast
rich
t] a
t 13:
15 2
2 Ja
nuar
y 20
15
Lewin, A. Y. and Peeters, C. (2006a) Offshoring work: business hype or the onset of fundamental transformation?, Long Range Planning,
39, pp. 221–239.
Lewin, A. Y. and Peeters, C. (2006b) The top-line allure of offshoring, Harvard Business Review, 84(3), pp. 22–24.
Manning, S., Massini, S. and Lewin, A. Y. (2008) A dynamic perspective on next-generation offshoring: the global search for science and
engineering talent, Academy of Management Perspective, August, pp. 35–54.
Maskell, P., Pedersen, T., Petersen, B. and Dick-Nielsen, J. (2006) Learning paths to offshore outsourcing: from cost reduction to
knowledge seeking. Working Paper 13/2006, CBS Center for Strategic Management and Globalization.
Mathews, J. A. and Zander, I. (2007) The international entrepreneurial dynamics of accelerated internationalisation, Journal of
International Business Studies, 38(3), pp. 387–401.
McGrath, R. G. (1996) Options and the entrepreneur: toward a strategic theory of entrepreneurial wealth creation, Academy of
Management Proceedings, pp. 101–105.
Mudambi, R. (2008) Location, control and innovation in knowledge-intensive industries, Journal of Economic Geography, 8(5),
pp. 699–725.
Oviatt, B. M. and McDougall, P. P. (2005) The internationalization of entrepreneurship, Journal of International Business Studies, 36(1),
pp. 2–8.
Shane, S. (2000) Prior knowledge and the discovery of entrepreneurial opportunities, Organizational Science, 11(4), pp. 448–469.
Shane, S. and Venkataraman, S. (2000) The promise of entrepreneurship as a field of research, Academy of Management Review, 26(1),
pp. 13–16.
Styles, C. and Seymour, R. G. (2006) Opportunities for marketing researchers in international entrepreneurship, International Marketing
Review, 23(2), pp. 126–145.
Venkataraman, S. (1997) The distinctive domain of entrepreneurship research: an editor’s perspective, in: J. Katz & R. Brockhaus (Eds),
Advances in Entrepreneurship, Firm Emergence, and Growth, Vol. 3, pp. 119–138 (Greenwich, CT: JAI Press).
Venkatraman, N. V. (2004) Offshoring without guilt, MIT Sloan Management Review, 45(3), pp. 14–16.
von Zedtwitz, M. (2004) Managing foreign R&D laboratories in China, R&D Management [Special issue], 34(4), pp. 439–452.
Yin, R. K. (1994) Case Study Research (Beverly Hills, CA: Sage).
Yli-Renko, H., Autio, E. and Sapienza, H. J. (2001) Social capital, knowledge acquisition and knowledge exploitation in young technology-
based firms, Strategic Management Journal, 22(6), pp. 587–613.
Zahra, S. A. (2005) A theory of international new ventures: a decade of research, Journal of International Business Studies, 36(1),
pp. 20–28.
Zahra, S. A. and George, G. (2002) International entrepreneurship: the current status of the field and future research agenda, in: M. A. Hitt,
R. D. Ireland, S. M. Camp & D. L. Sexton (Eds), Strategic Entrepreneurship: Creating a New Mindset, pp. 255–288 (Oxford:
Blackwell).
Leveraging Offshoring 413
Dow
nloa
ded
by [
Uni
vers
ity o
f M
aast
rich
t] a
t 13:
15 2
2 Ja
nuar
y 20
15