A Matter of Coherence: The Effects of Offshoring of Intangibles on Firm Performance

Offshoring of intangibles is a global production strategy based on the decision to externalize intangible activities to foreign countries. In the present work we test the existence of a positive relationship between offshoring intangibles and firm performance. To reap the full benefit of offshoring, firms are required to integrate and coordinate activities and knowledge; integration and coordination become difficult when activities are knowledge intensive as in the case of intangibles. We argue that the positive relation between offshoring intangibles and performance is strengthened if firms retain part of the knowledge related to the offshore outsourced activity, which reduces the risk of knowledge fragmentation and eases coordination and control. Our analysis suggests that some coherence between what a firm outsources abroad and what it offers positively moderates the relationship between offshoring intangible activities and firm performance.