Managing institutional differences for international outsourcing success : a case study of New Zealand manufacturing SME

Abstract

Purpose - Most of the research on international outsourcing of value chain activities focuses on larger firms. This study fills an important research gap by exploring how small and medium enterprises (SMEs) manage institutional differences to enhance their international outsourcing success. Design/methodology/approach – The paper uses data from interviews conducted with two managers of a New Zealand apparel manufacturing SME who have over 35 years of combined experience with international outsourcing. The case study SME had both failed and successful experiences in their international outsourcing ventures. Findings are discussed in the context of the extant literature on international outsourcing. Findings – SMEs overcome institutional constraints they face in offshore locations by leveraging from their entrepreneurial skills, learning from failures and using a relational governance mode. This results in these firms achieving performance targets and sustaining long term relationships with suppliers, defined as international outsourcing success in this study. Research limitations/implications – The findings may not be generalised as they are based on a single case study and cover only the client perspective. Practical implications – With the rise of international outsourcing of value chain activities, the findings are useful to SMEs aiming to achieving success in their outsourcing ventures in offshore locations. Originality/value –This study is one of only a few studies investigating SME international outsourcing that examines both failure and success.