Transforming organizational capabilities in strategizing: Strategic sourcing routines in two Danish offshoring enterprises

Offshored and networked enterprises are becoming an important if not leading organizational form and this development seriously challenges their organizational capabilities. More specifically, over the last years, SMEs have commenced entering these kinds of arrangements. As the organizational capabilities of SMEs are limited at the outset, even more emphasis is needed regarding the issues of developing relevant organizational capabilities. This paper aims at investigating how capabilities evolve during an offshoring process of more than 5 years in two Danish SMEs, i.e. not only short- but long-term evolvements within the companies. We develop our framework of understanding organizational capabilities drawing on dynamic capability, relational capability and strategy as practice concepts, appreciating the performative aspects of developing new routines.
Our two cases are taken from one author’s Ph.D. study on SME offshoring. The case study takes its point of departure in the initial event of manufacturing routines being offshored. This meant that previous collocated capabilities partly lost their value and relevance, and new capabilities had to be built. From there the cases have followed distinctive trajectories and the companies have changed their routines for handling knowledge between the new entities dispersed in space and time. Specifically the use of key boundary spanners as routine translators and implementers emerged as a key capability in the two case companies.
Further routines were reallocated over time thereby creating a growing need for new capabilities and transformed knowledge handling routines. IT emerged into an important resource to support more complex routines of product development as well as specific management and HRM processes assisting the transformation of the organizational capabilities of the SMEs.