Organizational Structure and Absorptive Capacity in Offshore Outsourcing

The offshore outsourcing (offshoring) posits a high level of risk because of time zone difference, cultural difference and client’s need for more controls over quality and schedule, etc. Knowledge gap between clients and vendors is one of the key challenges for outsourcing success. Offshoring vendors need to continuously acquire external knowledge from clients, assimilate and internalize the new knowledge to apply to outsourcing tasks. Offshoring vendors often have to re-structure project teams to adapt to clients’ needs. This paper aims to investigate how organizational structure attributes impact vendor absorptive capacity. A case study approach is used to develop a preliminary set of propositions. Vendors are expected to consider the propositions, skillfully design and implement organizational structure to develop absorptive capacity. Future stage of this research study is discussed. Limitations and future research is addressed at the end.