Cognitive Antecedents to the Knowledge Asset Outsourcing Decision

In the current knowledge economy, the decision on whether to outsource knowledge assets is arguably the most important decision in operations and supply chain management (OSCM). However, the theories of transaction cost economics (TCE) and the resource-based theory (RBT) are inconsistent in their ability to predict, describe or explain knowledge outsourcing decisions. Currently, a theory to explain this important OSCM decision does not seem to be available. This dissertation takes a view that strategic decisions like that of knowledge asset outsourcing are made by a two step decision process where (1) an individual level cognitive process where managers generate their solutions and (2) a firm level social process where managers seek to influence other managers about their opinion. Part I uses a behavioral experiment to understand how managers form their solutions to the knowledge outsourcing question. The part tests if the psychological closeness to a task being outsourced i.e. the task affinity and self-interest influences the managers to subvert the rational decision process and make “favorable” outsourcing decisions. Additionally, it also tests if the influence is indirect and mediated by the perception of asset specificity (TCE variable) and core competence (RBT variable). Part 2 adopts a naturalistic paradigm and conducts case study research to understand how these cognitive managers with different mindsets try to influence the firm decision. The structuration theory framework is adopted to study 11 decision opportunities and frame a typology of decision processes that are used by managers. The parsimonious typology has 4 ideal types based on the nature of data exchange (naive and involved) and the nature of mindset exchange (naive or involved). The dissertation offers a comprehensive understanding of how knowledge asset outsourcing decisions emerge. It aligns the strategy research in OSCM field to the current beliefs in strategic management. The typology can be used to develop contingencies that suggest the type of decision process to use in different conditions. The experiment validates that TCE and RBT influences how managers make decisions but shows that task affinity and self-interest influences the perception of core competency and the outsourcing decision.