Innovation Risks of Outsourcing within Knowledge Intensive Business Services (KIBS)

Innovation Risks of Outsourcing within Knowledge Intensive Business Services (KIBS)

Paul Trott (University of Portsmouth, UK) and Andreas Hoecht (University of Portsmouth, UK)
Copyright: © 2009 |Pages: 20
DOI: 10.4018/978-1-60566-176-6.ch004
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The United States and European economies have witnessed an enormous increase in the amount of specialized business services, which now provide critical inputs to firms in all sectors. It is this area of the economy which has witnessed huge expansion and development. KIBS include traditional professional business services such as accountancy and law, but also a new generation of KIBS such as IT expertise and internet development. Coupled to this growth has been an increase in the level of outsourcing. Outsourcing was originally confined to peripheral business functions and mainly motivated by a cost saving logic, but has now developed into a routine strategic management move that affects not only peripheral functions but the heart of the competitive core of organisations. This chapter analyses previous research and adopts a conceptual perspective in investigating the innovation-related risks to the organisation that can arise from strategic outsourcing. It uses the example of KIBS outsourcing to highlight the increased risks that arise from a move from traditional to strategic outsourcing and discusses some measures that managers can take to attempt to control these risks.
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Occasionally one would be forgiven for thinking that in these advanced developed economies servic es had replaced all manufacturing activities, and there had simply been a huge growth in coffee bars, smoothie bars and hair salons. In the most advanced service economies in the world such as the USA and UK, services now account for up to three-quarters of the wealth and 85% of employment (Tidd and Hull, 2003). Within the EU services now account for 60% of GDP (Eurostat, 2006). The term knowledge based economy has been coined to characterize some of the main changes in the development of economies over the past twenty years. Similarly, the influence of technology in general and information communication technologies in particular cannot be overstated. In virtually all industries there has been a huge growth in specialist knowledge and skills being made available to firms. For example in civil engineering and architecture, where previously much of the input came from the architect now the architect employs a range of specialists from: fire engineering; acoustic engineers; lighting designers, etc. A new range of disciplines have emerged offering specialist knowledge and skills. This has been replicated in virtually all industries (Gann and Salter, 2003).

The development of these economies has led to a massive increase in the amount of specialized business services which now provide critical inputs to firms in all sectors. It is this area of the economy (US and Europe) which has witnessed huge expansion and development. It is not simply that people are spending more time and money in hair salons (though that may also be true). It is these knowledge intensive business services (KIBS) which are the key behind the development of the service side of the economies. KIBS include traditional professional business services such as accountancy and law, as well as services that have a scientific and technical knowledge base such as IT/IS (Miles, 2003; Alvesson, 2004). Other examples include a new generation of KIBS. For example the provision of specialist services to the Oil industry has led to huge growth for Halliburton and Schlumberger, the world market leader for oil services. Indeed, while the share prices of Exon and Shell have doubled over the past four years the share price of Halliburton and Schlumberger has tripled (Financial Times, 2007).

The growth in information communication technologies during the 1980s and the development of the internet in the 1990s and into the 21st century has led to enormous sums of money being spent by firms in order to ensure that they are equipped to compete. In addition, the introduction of some of these business systems such as Enterprise Resource Planning systems (ERP) have led to significant reductions in costs and improvements in efficiency. If one then adds to the KIBS the huge growth in entertainment industries including the gaming industry (Xbox, Nintendo, Playstation, PC games, etc), the new on-line gambling industry (Party-Gaming, Gaming Corporation) and the more recent social networking industry (which includes Myspace, Bebo and Mypages) one begins to recognize just how much change and growth there has been to economies over the past ten years.

Key Terms in this Chapter

Outsourcing: A term used to describe the process of using external organisations to provide the firm with the necessary services it requires, and that it previously supplied from within. Such as maintenance, cleaning, catering, computer support, telecommunications services. The benefits of outsourcing include reduced costs and increased services.

Innovation: The process of developing and commercialising something new, usually a product, service or manufacturing process. The process is related to >invention but they are not identical twins. The management of innovation is a growing and significant subject in its own right. While there is continued debate in the literature about the range of activities covered by the term, there is broad agreement that successful innovation management involves research, technology development, marketing and manufacturing.

Core Capabilities: The knowledge and skill that resides in an organisation. Core capabilities include technical know-how, technical skills, business process know-how and business skills. Distinct capabilities are those things that the organisation is better at doing than its competitors.

Information Leakage: Information leakage refers to the unintended loss of information from an organization. This usually occurs as a result of employees passing information to others sometimes unwittingly sometimes wittingly.

Knowledge Intensive Business Services: Knowledge intensive business services (KIBS) include traditional professional business services such as accountancy and law, as well as services that have a scientific and technical knowledge base such as IT/IS. Other examples include a new generation of KIBS. The growth in information communication technologies during the 1980s and the development of the internet in the 1990s and into the 21st century has led to enormous sums of money being spent by firms in order to ensure that they are equipped to compete.

Complete Chapter List

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Editorial Advisory Board
Table of Contents
Dariusz Jemielniak, Jerzy Kociatkiewicz
Dariusz Jemielniak, Jerzy Kociatkiewicz
Chapter 1
Davydd J. Greenwood
This chapter questions the clarity of the concepts of “knowledge society” and “knowledge-intensive organization”. In particular, the author asserts... Sample PDF
Are Research Universities Knowledge-Intensive Learning Organizations?
Chapter 2
Juha Kettunen
The aims of knowledge management are to create knowledge and stimulate innovation. Knowledge management allows the knowledge of an organization to... Sample PDF
Construction of Knowledge-Intensive organizations in Higher Education
Chapter 3
Jeff Gold, Richard Thorpe
Continuing Professional Development (CPD) is usually conceived as a planned and formulated process for individual members of professional... Sample PDF
Collective CPD: Professional Learning in a Law Firm
Chapter 4
Paul Trott, Andreas Hoecht
The United States and European economies have witnessed an enormous increase in the amount of specialized business services, which now provide... Sample PDF
Innovation Risks of Outsourcing within Knowledge Intensive Business Services (KIBS)
Chapter 5
Lars Steiner
A new knowledge management perspective and tool, ANT/AUTOPOIESIS, for analysis of knowledge management in knowledge-intensive organizations is... Sample PDF
Actor-Network Theory and Autopoiesis: A New Perspective on Knowledge Management
Chapter 6
Jo A. Tyler, David M. Boje
This chapter fits the theme, the interplay between creativity and control in organizations. Story is often claimed to be a way to elicit tacit... Sample PDF
Sorting the Relationship of Tacit Knowledge to Story and Narrative Knowing
Chapter 7
Louise Grisoni
The central discussion in this chapter is that poetry can be used to provide a bridge between tangible, rational and explicit knowledge and tacit or... Sample PDF
Exploring Organizational Learning and Knowledge Exchange through Poetry
Chapter 8
Ester Barinaga
“How do we define our project goal?” “How are we going to coordinate our independent national studies?” “Who is responsible for what?” “How are... Sample PDF
Vagueness: The Role of Language in the Organizing Process of Knowledge Intensive Work
Chapter 9
Stephen Sheard
In this chapter the author offers an argument towards the resurgence of a proto-alphabetic imagination in electronic and mobile communications. It... Sample PDF
Tyranny of the Eye? The Resurgence of the Proto-Alphabetic Sensibility in Contemporary Electronic Modes of Media (PC/Mobile Telephony); and its Significance for the Status of Knowledge
Chapter 10
Krzysztof Klincewicz
The chapter discusses the role of IT Research & Analysis firms in the diffusion of knowledge management. The research is based on content analysis... Sample PDF
Knowledge Management and IT Research and Analysis Firms: Agenda-Setters, Oracles and Judges
Chapter 11
Fatima Guadamillas-Gomez, Mario J. Donate-Manzanares
This chapter analyses the implementation of knowledge management strategies (KMS) in technologyintensive firms. Firstly, a review of KMS in the... Sample PDF
Knowledge Management Strategies Implementation in Innovation Intensive Firms
Chapter 12
Arla Juntunen
This chapter focuses on the development of the Knowledge Management (KM) platform, and, more generally, the knowledge- and resource based view (RBV)... Sample PDF
Developing a Corporate Knowledge Management Platform in a Multibusiness Company
Chapter 13
Jonathan D. Owens
Success in new product development (NPD) can be considered a general aim for any company wishing to survive in the 21st Century. It has been found... Sample PDF
Modeling the New Product Development Process: The Value of a Product Development Process Model Approach as a Means for Business Survival in the 21st Century
Chapter 14
Anders Örtenblad
The ambition of this chapter is to pay some attention to more obvious, as well as more subtle, methods for organizations to become independent of... Sample PDF
Achieving Organizational Independence of Employees' Knowledge Using Knowledge Management, Organizational Learning, and the Learning Organization
Chapter 15
Angelo Ditillo
Knowledge-intensive firms are composed of various communities, each characterized by specialized knowledge. These communities operate as critical... Sample PDF
Balancing Stability and Innovation in Knowledge-Intensive Firms: The Role of Management Control Mechanisms
Chapter 16
Aino Kianto, Jianzhong Hong
Nowadays knowledge and competencies are the key productive factors, and the organizational capability for continuous learning, development and... Sample PDF
The Knowledge-Based Approach to Organizational Measurement: Exploring the Future of Organizational Assessment
Chapter 17
Vidar Hepsø
In knowledge management literature, common information spaces (CIS) are believed to be instrumental in the development and sharing of knowledge.... Sample PDF
Common Information Spaces in Knowledge-Intensive Work: Representation and Negotiation of Meaning in Computer-Supported Collaboration Rooms
Chapter 18
Agnieszka Postula
This chapter presents and discusses two factors – creativity and control – which correspond to every organizational reality. IT specialists’... Sample PDF
Creativitiy and Control in IT Professionals' Communities
Chapter 19
Patrocinio Zaragoza-Saez, Enrique Claver-Cortes, Diego Quer-Ramon
Knowledge is one of the basic production factors owned by enterprises, and knowledge management is one of the main dynamic capabilities on which... Sample PDF
A Qualitative Study of Knowledge Management: The Multinational Firm Point of View
Chapter 20
Cliff Bowan, Pauline Gleadle
The chapter addresses a central dilemma from the viewpoint of dynamic capabilities and the resource based view of the firm: how to manage creativity... Sample PDF
Culture as a Dynamic Capability: The Case of 3M in the United Kingdom
Chapter 21
Maria E. Burke
The purpose of this chapter is to consider an original way of improving Knowledge Management relationships. This is done within the context of an... Sample PDF
Cultural Issues, Organizations and Information Fulfillment: An Exploration Towards Improved Knowledge Management Relationships
Chapter 22
Darius Mehri
The author worked in the research and design department at a large Toyota company in the late 1990s and experienced an innovative process where... Sample PDF
Engineering Design at a Toyota Company: Knowledge Management and the Innovative Process
Chapter 23
Federica Ricceri, James Guthrie
The shift towards a knowledge based economy is at the core of the debate of contemporary management and accounting literature and organisations are... Sample PDF
Critical Analysis of International Guidelines for the Management of Knowledge Resources
Chapter 24
Christiane Prange
Internationalization has accelerated the speed of knowledge generation and innovation. Thus, companies increasingly need to pool and create new... Sample PDF
Strategic Alliance Capability: Bridging the Individual Back into Inter-Organizational Collaboration
Chapter 25
Meryem Sevinc, Lawrence Locker, John D. Murray
In the contemporary context of knowledge discovery, the amount of information and the process itself has increased in complexity. Relevant to the... Sample PDF
Automation vs. Human Intervention: Is There any Room Left for the Analyst in the Data Mining Process?
Chapter 26
Joanna Shih
The hi-tech firms that predominate in Silicon Valley contain a large proportion of knowledge workers—employees with high levels of education and... Sample PDF
Temporality and Knowledge Work
Chapter 27
Alice MacGilivray
Knowledge management is often associated with the need for change and related shifts in ontologies, ways of knowing and ways of working. Combine the... Sample PDF
Knowledge Intensive Work in a Network of Counter-Terrorism Communities
Chapter 28
Tatiana Andreeva
Contemporary literature usually views knowledge creation and knowledge sharing as either independent or positively related processes. However, based... Sample PDF
Tensions between Knowledge Creation and Knowledge Sharing: Individual Preferences of Employees in Knowledge-Intensive Organizations
Chapter 29
Steffen Boehm, Chris Land
Knowledge is implicitly assumed to form an increasingly important, or even the dominant source of values for today’s knowledge based organizations.... Sample PDF
The 'Value' of Knowledge: Reappraising Labour in the Post-Industrial Economy
Chapter 30
Alexander Styhre
This chapter discusses the use of media in knowledge-intensive organizations. Media is defined here as the integration of technologies, practices... Sample PDF
New Media and Knowledge Work
Chapter 31
Ben Tran
This chapter examines knowledge and innovation as invaluable factors affecting the longevity of large organizations. It presents the history and... Sample PDF
Knowledge Management: The Construction of Knowledge in Organizations
Chapter 32
Premilla D’Cruz, Ernesto Noronha
Scholars researching the area of the sociology of professions had earlier predicted that as occupations seek to improve their public image... Sample PDF
Redefining Professional: The Case of India's Call Center Agents
Chapter 33
Dariusz Jemielniak, Jerzy Kociatkiewicz
Knowledge management and knowledge-intensive work are two of today’s hot buzzwords, though both already have a history of managerial usage. While... Sample PDF
Knowledge Management: Fad or Enduring Organizational Concept?
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