Abstract
We contribute to the study of offshoring and outsourcing by examining how stakeholders’ ethical evaluations of these decisions are influenced by both their roles and the issues embedded within the decisions. Although offshoring and outsourcing have been studied from a transactional perspective, the moral issues embedded within these decisions can profoundly affect how the organization is perceived by outside stakeholders. First, we contend that investors use different moral paradigms compared with consumer stakeholders, as a result the stakeholder role an individual occupies significantly influences their ethical evaluation of offshoring and outsourcing decisions. Next, we examine whether embedded issues of product quality and information security increase the moral intensity of offshoring and outsourcing decisions, thereby negatively influencing ethical evaluations. Using vignettes, we find that respon- dents viewed either offshoring or outsourcing less favorably than relocation. Surprisingly, respondents viewed offshoring with data security risks more negatively than offshore outsourcing with quality risks, suggesting that the issue of information security has a greater moral intensity than the issue of product or service quality for both consumer and investor stakeholders. Thus, we show that that embedded issues play a significant role in stakeholders’ ethical judgments of business decisions, such as offshoring and outsourcing.
Similar content being viewed by others
References
Alwitt, L. and T. Donley: 1996, The low income consumer: Adjusting the balance of exchange (Sage: Thousand Oaks, CA).
Archer, N. P. and G. O. Wesolowsky: 1996, ‘Consumer Response to Service and Product Quality: Study of Motor Vehicle Owners’, Journal of Operations Management 14(2), 103-118.
Armstrong, J. S. and T. S. Overton: 1977, ‘Estimating Nonresponse Bias in Mail Surveys’, Journal of Marketing Research 14(3), 396–402.
Ashforth, B. and F. Mael: 1989, ‘Social Identity Theory and the Organization’, Academy of Management Review 14(1), 20-39.
Auger, P., T. M. Devinney and J. J. Louviere: 2007, ‘Using Best-Worst Scaling Methodology to Investigate Consumer Ethical Beliefs Across Countries’, Journal of Business Ethics 70, 299-326.
Beekun, R.I., Y. Stedham, J. H. Yamamura and J. A, Barghouti: 2003, ‘Comparing Business Ethics in Russia and the US’, International Journal of Human Resource Management 14(8), 1333-1349.
Berman, S. L., A. C. Wicks, S. Kotha and T. M. Jones: 1999, ‘Does stakeholder orientation matter? The relationship between stakeholder management models and firm financial performance’, Academy of Management Journal 42(5), 488-506.
Bharadwaj, N. and A. L. Roggeveen: 2008, ‘The impact of offshored and outsourced call service centers on customer appraisals’, Marketing Letters 19(1), 13-23.
Bogdanov, V.: 2008, Offshore Outsourcing: Current State of Affairs and Future Trends in Europe. www.itworld.com, posted July 23, 2008.
Brown, S. P. and L. B. Siegel: 2005, ‘Mass layoff data indicate outsourcing and Offshoring Work’, Monthly Labor Review August, 3–10.
Campbell, K. L. A. Gordon, M. P. Loeb and L. Zhou L.: 2003, ‘The Economic Cost of Publicly Announced Information Security Breaches: Empirical Evidence from the Stock Market’, Journal of Computer Security 11(3), 431-448.
Cascio, W. F.: 1993, ‘Downsizing What Do We Know? What Have We Learned?’ Academy of Management Executive 7, 95-104.
Cavusoglu, H., B. Mishra and S. Raghunathan.: 2004, ‘The Effect of Internet Security Breach Announcements on Market Value: Capital Market Reactions for Breached Firms and Internet Security Developers’, International Journal of Electronic Commerce 9(1), 70-104.
Chen, S. F.: 2008, ‘The Motives for International Acquisitions: Capability Procurements, Strategic Considerations, and the Role of Ownership Structures’, Journal of International Business Studies 29, 454-471.
Coucke, K. and L. Sleuwaegen: 2008, ‘Offshoring as a Survival Strategy: Evidence from Manufacturing Firms in Belgium’, Journal of International Business Studies 39, 1261-1277.
Crafton S. M., G. E. Hoffer and R. J. Reilly: 1981, ‘Testing the Impact of Recalls on the Demand for Automobiles’, Economic Inquiry 19(4), 694-703.
Dacin, M. T., C. Oliver and J. P. Roy: 2007, ‘The legitimacy of strategic alliances: An institutional perspective’, Strategic Management Journal 28(2), 169-187.
Davidson, W. N. and D. L. Worrell: 1992, ‘The Effect of Product Recall Announcements on Shareholder Wealth’, Strategic Management Journal 13(6), 467-473.
Davis, M., N. Johnson and D. Ohlmer: 1998, ‘Issue-Contingent Effects on Ethical Decision-Making: A Cross-Cultural Comparison’, Journal of Business Ethics 17, 373-389.
Dial, J. and K. J. Murphy: 1995, ‘Incentives, Downsizing, and Value Creation at General Dynamics’, Journal of Financial Economics 37, 261-314.
Donaldson, T. and L. E. Preston: 1995, ‘The stakeholder theory of the corporation: Concepts, evidence, and implications’, Academy of Management Review 20(1), 65-91.
Donaldson, T. and P. Werhane: 1996, Ethical Issues in Business: A Philosophical Approach (Prentice-Hall, Upper Saddle River, New Jersey).
Fassin, Y.: 2009, ‘The Stakeholder Model Refined’, Journal of Business Ethics 84(1), 113-135.
Federal Deposit Insurance Corporation: 2004, Offshore Outsourcing of Data Services by Insured Institutions and Associated Consumer Privacy Risks. http://www.fdic.gov/regulations/examinations/offshore/. Accessed 7 July 2009
Frey, B. F.: 2000, ‘The Impact of Moral Intensity on Decision Making in a Business Context’, Journal of Business Ethics 26, 181-195.
Fritzsche, D. and H. Becker: 1984, ‘Linking Managerial Behavior to Ethical Philosophy - An Empirical Investigation’, Academy of Management Journal 27, 166-175.
Geyskens, I., J. B. Steenkamp and N. Kumar: 2006, ‘Make, buy, or ally: A transaction cost theory meta-analysis’, Academy of Management Journal 49(3), 519-543.
Gilley, K.M., and A. Rasheed: 2000, ‘Making more by doing less: An analysis of outsourcing and its effects on firm performance’, Journal of Management 26(4), 763-790.
Gray, J. V., A. V. Roth and B. T. Tomlin: 2007, ‘Quality Risk in Outsourcing: Evidence from the U.S. Drug Industry’, Working Paper at the Wharton School’s Mack Center for Technology Innovation. http://emertech.wharton.upenn.edu/TMiniPapers07/Gray_Roth_Tomlin_QualityRiskInOutsourcing.pdf.
Grover, S. L. and C. Hui: 1994, ‘The Influence of Role Conflict and Self Interest on Lying in Organizations’, Journal of Business Ethics 13: 295-303.
Hunt, S. D. and A. Z. Vasquez-Parraga: 1993, ‘Organizational Consequences, Marketing Ethics, and Salesforce Supervision’, Journal of Marketing Research 30(1), 78-90.
Hunt, S. D. and S. Vitell: 1986, ‘A General Theory of Marketing Ethics’, Journal of Macromarketing 6, 5-16.
Jacobides, M. G and S. G. Winter: 2005, ‘The co-evolution of capabilities and transaction costs: Explaining the institutional structure of production’, Strategic Management Journal 26, 395-413.
Jones, T. M.: 1991, ‘Ethical Decision Making by Individuals in Organizations: An Issue-Contingent Model’, Academy of Management Review 16(2), 366-395.
Jones T. M. and V. L. Huber: 1992, ‘Issue Contingency in Ethical Decision Making’, International Association for Business and Society Proceedings, pp. 156–166
Keown, C.: 1988, ‘Consumer Reactions to Food and Drug Product Recalls: A Case Study of Hawaiian Consumer’, Journal of Consumer Policy 11(2), 209-221.
Koch, C.: May 1, 2005. Offshore Outsourcing: Don’t Forget IT Security, www.csoonline.com. Accessed: http://www.csoonline.com/article/220330/Offshore_Outsourcing_Don_t_Forget_IT_Security?contentId=220330&slug=&.
Konig, C. J. and M. Kleinmann: 2007, ‘Time Management Problems and Discounted Utility’, Journal of Psychology 141(3), 321-334.
Kotabe, M.: 1990, ‘The relationship between offshore outsourcing and innovativeness of U.S. multinational firms: An empirical investigation’, Journal of International Business Studies 3, 623-638.
Lei, D. and M. Hitt: 1995, ‘Strategic restructuring and outsourcing: The effect of mergers and acquisitions and LBOs on building firm skills and capabilities’, Journal of Management 21(5), 835-859.
Lessard, D. R.: 1996, ‘Incorporating Country risk in the Valuation of Offshore Projects’, Journal of Applied Corporate Finance 9(3), 52-63.
Lewin, A. Y. and V. Couto: 2007, Next Generation Offshoring: The Globalization of Innovation (Duke University CIBER/Booz Allen Hamilton Report, Durham, NC).
Loe, T. W., L. K. Ferrell and P. Mansfield: 2000, ‘A Review of Empirical Studies Assessing Ethical Decision Making in Business,’ Journal of Business Ethics 25, 185-204.
Lohr, S.: 2008, `Offshore Outsourcing's Next Wave: How High?', The New York Times, February 14.
McIntyre, F., J. Thomas and F. Gilbert: 1999, ‘Consumer Segments and Perceptions of Retail Ethics,’ Journal of Marketing Theory and Practice 2, 43–53
McNulty, E.: 2007, ‘Boss, I Think Someone Stole Our Customer Data’, Harvard Business Review 85, 37–50
Metters, R. 2008: ‘A typology of offshoring and outsourcing in electronically transmitted services’, Journal of Operations Management 26(2): 198-211.
Michaelson, C.: 2008, ‘Moral Luck and Business Ethics’, Journal of Business Ethics 83, 773-787.
Morris, S. A. and R. A. McDonald: 1995, ‘The Role of Moral Intensity in Moral Judgments: An Empirical Investigation’, Journal of Business Ethics 14, 715-726.
Muncy, J., and S. Vitell: 1992, ‘Consumer ethics: An Empirical Investigation of the Ethical Beliefs of the Final Consumer,’ Journal of Business Research 24(1): 297-312.
Pablo A.: 1994, ‘Determinants of Acquisition Integration Level: A Decision-Making Perspective’, Academy of Management Journal 37(4), 803-836.
Palmon, O., H. Sun and A. P. Tang: 1997, ‘Layoff Announcements: Stock Market Impact and Financial Performance,’ Financial Management 26, 54-68.
Pelton, L. E., J. Chowdhury and S. J. Vitell: 1999, ‘A framework for the examination of relational ethics: An interactionist perspective’, Journal of Business Ethics 19(3), 241-253.
Pruitt, S. W. and D. R. Peterson: 1986, ‘Security Price Reactions around Product Recall Announcements’, Journal of Financial Research 9(2), 113-122.
Radio Boston: 2008, ‘Made in Massachusetts: Zildjian Cymbals’, November 24, http://www.radioboston.org
Rai, S.: 2006, ‘Security Breaches Worry Outsourcing Industry’, New York Times October 5, C15
Reilly, R. J. and G. E. Hoffer: 1983, ‘Will Retarding the Information Flow on Automobile Recalls Affect Consumer Demand?’, Economic Inquiry 21(3), 444-447.
Ren, Z. J. and Y-P. Zhou: 2008, ‘Call Center Outsourcing: Coordinating Staffing Level and Service Quality’, Management Science 54(2), 369-383.
Robertson, C. and W. Crittenden: 2003, ‘Mapping Moral Philosophies: Strategic Implications for Multinational Firms’, Strategic Management Journal 24, 385-392.
Robertson, C. W. Crittenden, M. Brady and J. Hoffman: 2002, ‘Situational ethics across borders: A multicultural examination’, Journal of Business Ethics 38, 327-338.
Rosynsky, P. T.: 2007, ‘Pet Food Express Suing Manufacturer Over Tainted Products’, San Jose Mercury News April 5
Sako, M.: 2006, ‘Outsourcing and offshoring: Implications for productivity of business services’, Oxford Review of Economic Policy 22(4), 499-512.
Sims, R. and T. Keon: 1999, “Determinants of Ethical Decision Making: The Relationship of the Perceived Organizational Environment’, Journal of Business Ethics 19, 393-401.
Singhapakdi, A., S. J. Vitell and K. L. Kraft: 1996, ‘Moral Intensity and Ethical Decision-Making of Marketing Professionals’, Journal of Business Research 36, 245-255.
Spake, D. F., C. M. Megehee and G. R. Franke: 2007, ‘Students’ Views of Ethical Behavior and the Impact of Association’, Marketing Education Review 17(3), 33-47.
Spicer, A., T. Dunfee and W. Bailey: 2004, ‘Does national context matter in ethical decision making? An empirical test integrative social contracts theory’, Academy of Management Journal 47(4), 610-620.
Swarts, K.: 2003, ‘Manufacturing the Future’, OutsourcingManufacturing.com January. http://www.outsourcing-manufacturing.com/future2003.html
Tabachnick, B. G. and L. S. Fidell: 1996, Using Multivariate Statistics, 3rd edition, (HarperCollins, New York).
Thomsen, M. R. and A. M. McKenzie: 2001, ‘Market Incentives for Safe Foods: An Examination of Shareholder Losses from Meat and Poultry Recalls’, American Journal of Agricultural Economics 83(3), 526-538.
Treviño, L. K.: 1986, ‘Ethical Decision Making in Organizations: A Person-Situation Interactionist Model,’ Academy of Management Journal 11, 601-617.
Treviño, L. and K. Nelson: 2004, Managing Business Ethics: Straight Talk About How To Do It Right (Wiley, Hoboken, New Jersey).
Treviño, L. K. and S. A. Youngblood: 1990, ‘Bad Apples in Bad Barrels: A Causal Analysis of Ethical Decision Making’, Journal of Applied Psychology 75, 378-385.
Tsalikis, J., and B. Seaton: 2008, ‘Consumer Perceptions of Business Ethical Behavior in Former Eastern Block Countries,’ Journal of Business Ethics 82, 919-928.
Turner, J. C.: 1985, ‘Social Categorization and the Self-Concept: A Social Cognitive Theory of Group Behavior’, in E. J. Lawler (ed.) Advances in Group Processes (JAI Press, Greenwich, CT), pp. 77-122.
Verhovek, S. H. and L. Zuckerman: 2001, ‘Boeing, Jolting Seattle, Will Move Headquarters’, New York Times March 22: A16.
Vijayan, J.: 2004, ‘Offshore Outsourcing Poses Privacy Perils’, Computerworld Management February 20. http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=90343. Retrieved from July 2, 2009
Vitell, S.: 2003, ‘Consumer Ethics Research: Review, Synthesis and Suggestions for the Future’, Journal of Business Ethics 43, 33-47.
Walker, G. and D. Weber: 1984, ‘A transaction cost approach to make or buy decisions’, Administrative Science Quarterly 29, 373-391.
Weber, J.: 1996, ‘Influences Upon Managerial Moral Decision Making: Nature of the Harm and Magnitude of the Consequences’, Human Relations 49(1), 1-22.
Whitaker, J., M. S. Krishnan and C. Fornell: “Does Offshoring Impact Customer Satisfaction?”, Social Science Research Network Working Paper. http://ssrn.com/abstract=1010457. Retrieved from July 2, 2009
Williamson, O. E.: 1975. Markets and hierarchies: Analysis and antitrust implications (Free Press, New York).
Acknowledgments
The authors would like to gratefully acknowledge the research assistance of Michael McGrath, Scott Welsh, Emilia Altshul and Julie Tockerman as well as the generous support of the McCarthy Family Fellowship.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Robertson, C.J., Lamin, A. & Livanis, G. Stakeholder Perceptions of Offshoring and Outsourcing: The Role of Embedded Issues. J Bus Ethics 95, 167–189 (2010). https://doi.org/10.1007/s10551-009-0353-0
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10551-009-0353-0