Northwestern Institute on Complex Systems
Knowledge Creation and Innovation in Global Product Development Networks: The Strategic Use of Captive Offshore Centers
Wednesdays@NICO Seminar, Noon, May 26 2010, Chambers Hall, Lower Level
Prof. Paul Leonardi, Northwestern University
Recently, many large product development organizations have begun to abandon their offshore outsourcing partnerships and establish captive offshore centers. Captive centers – where workers are employed by the parent company – promise reduced administrative overhead and increased security of intellectual property. Yet most companies continue to use their captive centers in much the same way as they used their outsourcing partners: they send them routine, low status work. This ethnographic study traces the evolution of a captive offshore center in India belonging to a U.S. Automaker from shortly after its establishment in 2005 through 2010. The findings indicate that workers at the offshore center were frequently demotivated by the low-status work they received from the automaker’s global engineering centers and left the company after a short tenure. To combat this turnover problem, management at the offshore center attempted to diversify the types of work engineers received by creating different types of team based structures. Our analysis indicates that certain of these new team-based structures did bring higher quality work to the center. But these same structures undermined the strategic position that the off-shore center occupied at the hub of the automaker’s global engineering network and, consequently, impeded its ability to create valuable new knowledge for the company.
Paul Leonardi is the Breed Junior Professor in the Department of Communications Studies and Department of Industrial Engineering at Northwestern University.