Reserve-Bank.com - Banking Forum

[Petrosjan]

Cooperation as alternative for offshoring?: Crossing organizational boundaries instead of geographical ones

As a strategic sourcing consultant I have helped several clients to migrate activities to offshore locations like India and Poland. These projects have all been very interesting and challenging for me as a professional. For the employees involved (the people that did the work on the onshore location) however, the consequences were much less positive. Most of them lost their jobs. Besides these adverse consequences on an individual level, my concerns grew about the effect offshoring will have on a macro economic level, that is the impact on the competitiveness of Europe. Don’t misunderstand me, I am a true believer in the market mechanism and I fully understand that sound decision making processes can lead companies to offshore locations (I even support that, being a consultant that earns his living as a result of developments like that). But that doesn’t mean that I cannot look for alternatives that are better for both individual employees and (onshore) countries as a whole.

That’s the reason why I have recently started my PhD research on interorganizational relationships, or simply put, co operations between companies. I would like to gain insights in the way interorganizational relationships, like joint ventures, can be more successful and that way can be a serious alternative for companies that decide not to offshore activities. The logic behind it is quite simple: the most important reason for companies to offshore activities is cost reduction. Labor arbitrage (the difference between wages on onshore and offshore locations) enables them to decrease costs of production significantly. Another way of decreasing costs per transaction is increasing volumes and by doing this, achieve economies of scale. This can be done by outsourcing activities to a third party or, in case a company wants a higher level of control over the activities, by cooperating with similar companies (most often, competitors). By crossing organizational boundaries, companies can find a good alternative for crossing geographical boundaries.

In my research, I want to focus on the relationship between organizational design (org structure, governance, etc.) and organizational behavior (=the behavior of employees). I would like to gain insights in the organizational design variables that have most impact on the success of interorganizational relationships. I am concentrating on joint ventures between financial institutions. To be even more precise, I am looking into joint ventures between financial institutions that have been established to jointly process transactional activities like payments-, mortgages- and securities processing.

I am very interested in your ideas about this subject. Furthermore, I am looking for interesting examples of joint ventures between financial institutions that I can use as cases.

Your input will be highly appreciated.

Thanks in advance.

Petrosjan Damen
The Netherlands

[sapphirecapital]

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