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2010/2011  KAN-CM_V67  Managing Outsourcing in the age of Globalization and Innovation

English Title
Managing Outsourcing in the age of Globalization and Innovation

Course Information

Language English
Point 7,5 ECTS (225 SAT)
Type Elective
Level Full Degree Master
Duration One Quarter
Course Period Autumn . Second Quarter . Spring
Pending schedule: Tuesday Week 43: 13.30-15.10 Tuesday Week 44-50: 13.30-17.00 This course will also be offered in Spring 2012
Time Table Please see course schedule at e-Campus
Study Board
Study Board for MSc in Economics and Business Administration
Course Coordinator
Serden Ozcan - soz.ino@cbs.dkSecretary Tuyala Bernardo Rasmussen - tbr.ino@cbs.dk
Main Category of the Course
  • Supply Chain Management and Logistics
  • Corporate and Business Strategy
  • Globalization, International Business, markets and studies
  • Innovation and entrepreneurship
Last updated on 29 maj 2012
Learning Objectives
At the end of the course, the student is expected to be able to:
• Define and describe the general process of vertical disintegration and identify the past, present and future trends in its nature (e.g. business processes, industry, geography, contract type).
• Understand, discuss and challenge the economic reasoning behind a firm’s outsourcing decision and critically assess the contemporary theories and their predictions in relation to their practical application
• Understand and analyze the determinants and the processes of innovation outsourcing and specify success and failure factors.
• Discuss the different ways in which companies can build business models that allow them to access and leverage the potential of external contributors.
• Understand how to frame a written report using a combination of course literature and examples from real world settings.
Understand the range of motives and incentives that affect the decision of individual contributions to produce and reveal knowledge and matter to the outsourcing unit.
Master level students – all lines allowed, also external students from Danish and International Universities.
Individual written project (max 15 pgs)
Exam Period Winter Term
Prerequisites for Attending the Exam
Course Content

The course is divided into two modules equal in duration. In the first module, we focus on the first wave of outsourcing that the world has experienced since late 1990s. We lay out the basics. We frame the phenomenon of outsourcing, introduce associated concepts and examine its macro-economic implications. We then adopt a firm-level approach to investigate questions such as why and how firms outsource? Which firms are more likely to outsource? When does outsourcing make economic sense? What determines the cost of outsourcing? How does technological modularity and organizational design affect the decision to outsource? When to choose multiple partners? from the perspectives of organizational economics, strategic management and organization theory.

The second module takes us to the road ahead. It is structured around the idea that sources of novelty have become increasingly distributed and that success in outsourcing of innovation is strongly related to the ability to tap such sources. We address critical questions such as how to effectively find and/or attract inputs from individuals scattered across the globe? How to evaluate inputs from a range of potential sources of innovation? What economics logic explains that individual contributors reveal their solutions and innovations? How do technologies affect the possibilities of outsourcing to a distributed pool of (potential) contributors?

The course´s development of personal competences:

First came manufacturing, the IT and support functions. Now companies are farming out R&D to cut costs and get new products to markt cheaper and faster. First, it was R&D labs and contract research organizations. Now, innovation is increasingly sourced from the end users, individual suppliers and online communities. First, it was product extensions and incremental search. Now readical breakthourghs and non-local search. First, it was China, and then came India. Now the global market for knowledge and labour. Welcome to the Outsourcing Revolution Part II: The Next Generation. As Business Week puts it: "It is here, it is real and it is inevitable"

In the age of borderless world, firm boundaries have not only become open but opaque. Competition is no longer between firms but networks of firms, organizations and communities tied together through vertical and horizontal relations. Competitive advantage is hardly grounded in size or scale economies but being agile, innovative and architectural. This course, offered in collaboration with the Danish User-Centered Innovation Lab (DUCI)and its corporate partners examines how the 21st century firm should manage the "second phase" of the ongoing outsourcing revolution. The course is designed for anyone who is interested in understanding the why, what, how and where of outsourcing from micro-economics based perspectives in the fields of strategy, organization and innovation. It seeks to equip the students with applied knowledge on how managers develop, design and execute complex outsourcing projects and manage resulting relationships. The course aims to address the pitfalls, dilemmas, trade-offs and issues pertinent to tomorrow´s outsourcing that tomorrow´s decision makers are likely to confront.

Teaching Methods
The course will employ a variety of teaching forms, including lectures and guest lectures by practitioners and discussions based on visual documentaries.

Module 1: Outsourcing Revolution Part I

Harrison, A.E. & McMillan, M.S. (2006). “Dispelling Some Myths About Offshoring”,

Academy of Management Perspectives, 20(4):6-22

Bhagwati, J. Panagariya, A. & Srinavasan, T.N. (2004). “The Muddles over Outsourcing”, Journal of Economic Perspectives, 18(4): 93-114.

Grossman, G. & Helpman, E. (2002). “Outsourcing in a Global Economy”, CEPR Discussion Papers 3165

Levy, D. (2005). “Offshoring in the New Global Political Economy”, Journal of

Management Studies, 42(3): 685-694

Fontenay, C. D. & Gans, J. (2009). “A Bargaining Perspective on Strategic Outsourcing and Supply Competition”, Srategic Management Journal, 29: 819-839.

Adler, P.S. (2003). “Making the HR Outsourcing Decision”, Sloan Management Review, 45(1): 53-60

Sturgeon, T.J. (2002). “Modular Production Networks: A New American Model of Industrial Organization”. Industrial and Corporate Change,11 (3) 451-496

Module 2: Outsourcing Revolution Part II

Lakhani, K.R. & Jeppesen L.B. (2007) Getting Unusual Suspects to Solve R&D Puzzles. Forethought. Harvard Business Review 85, no. 5 (May)

Jeppesen, L.B. & Frederiksen, L. (2006) Why do User Contribute to Firm-hosted User Communities? Organization Science. 17: 45-63.

Quinn, J. B. (2000): Outsourcing Innovation: The New Engine of Growth. Sloan Management Review; Summer 2000; Vol. 41, No. 4, pp. 13-28.

Wired: Innocentive: Crowdsourcing Diversity