Re-evaluating the Offshoring Decision: A Behavioral Approach to the Role of Performance Discrepancy

Re-evaluating the Offshoring Decision: A Behavioral Approach to the Role of Performance Discrepancy Stefano, Elia; Goerzen, Anthony; Piscitello, Lucia; Valentino, Alfredo Firms are in a continuous process of critically re-evaluating their offshoring strategies due to performance discrepancies. While prior research has focused on the implementation of organizational responses to performance shortfalls, we examine the offline search process, a key antecedent of organizational change, during which firms simultaneously explore alternative solutions when facing either a positive or a negative discrepancy between performance and aspirations. We adopt the Behavioral Theory of the Firm (BTOF) to investigate how the search process is affected by the size and nature (as being positive or negative) of the discrepancy as well as how it is moderated by cognitive biases. By examining 441 offshoring initiatives, we study firms’ search processes in a novel context that refers either to “local” solutions that are close to the current activity (i.e., expansion in the same host country) or “distant” solutions that are far from the current one (i.e., relocation to a third country or to the home country). Our results provide new insights into organizational search, namely that performance shortfalls lead to distant search unless this choice is moderated by a location-specific anchor bias relating to the strategic importance of host location, while positive discrepancies trigger local search with decision-makers more inclined to consider expansion in the current host country. This is the peer reviewed version of the following article: Elia, S., Goerzen, A., Piscitello, L. and Valentino, A. (2022), Re-evaluating the offshoring decision: A behavioral approach to the role of performance discrepancy. J. Manage. Stud.. Accepted Author Manuscript, which has been published in final form at https://doi.org/10.1111/joms.12857. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited.