Impact of Offshore Outsourcing on Competitive Advantage of U.S. Multinational Corporations

Offshore outsourcing became a common practice by most United States and Western corporations after the Internet became viable. Outsourcing also has occurred within Information Technology (IT) and subsequently has become part of the strategy of numerous American and Western European corporations. The question, therefore, is whether outsourcing is a significant contributor to building and sustaining a firm's competitive advantage. We examine the question in terms of the types of contracts generally employed, the degree of market freedom in the offshore country, its national culture, knowledge transfer, legal and political conditions, and the costs involved. Our research found that offshore outsourcing had no significant impact on the competitive advantage of a multinational corporation. We did find considerable support for regarding the time and material elements of the contract. Market freedom factors and multinational corporations' offshore outsourcings were significant variables of the competitive advantage of multinational corporations.