The Interplay between Disseminative and Absorptive Capacity in Offshoring - A case study on a Swedish financial firm and its offshoring in the Baltics.

Abstract: Prior research has investigated into the implications of offshoring and how the configuration complexity arising from offshoring effects the organizational set up. Moreover, research in offshoring has to a large extent emphasized the challenges that arises when relocating activities across borders, without specifically study how knowledge transfer is impacted. In addition, research on knowledge transfer between the headquarter and the subsidiary (offshored unit) has been presented by either investigating the disseminative capacity of the sender or the absorptive capacity of the receiver, and not the interplay between the two. This study seeks to address this by investigating how the configuration complexity arising from offshoring influence the transfer of knowledge, and more specifically the interplay between the disseminative and absorptive capacity. This have been completed by analyzing a Swedish firm within the financial industry and its offshored unit in the Baltics. The result shows that the configuration complexity arising from the relocation and reintegration of activities has a major influence on the transfer of knowledge. We find evidence that the sender’s disseminative capacity plays a crucial role, in terms of conquering configuration complexity but also in order to ensure that the receiving unit reaches a desired level of absorptive capacity. We also find evidence for the importance of including physical interaction between representatives from the headquarter and the offshored unit, as a measure to improve the knowledge transfer. This study contributes to the existing literature by shedding light on how configuration complexity impacts the knowledge transfer within the firm.