Timo Seppälä

Tracking Offshoring and Outsourcing Strategies in Global Supply Chains

The dynamics in industrial business networks, caused by the disaggregation of firms’ value and supply chains, cause product life cycle phases and tasks to be transferred from advanced market economies to emerging market economies. In this chapter, I track the linkages between changes in a lead firm’s business environment and changes in the lead firm’s strategic offshoring and outsourcing actions; I also track how these changes in the lead firm’s behaviour are then translated into a supplier firm’s strategy and offshoring decisions. Additionally, I discuss offshoring and outsourcing strategies in global value chains. The increasing level of highly skilled labour in emerging market economies enables industrial business networks to rearrange themselves along with shorter life cycles. Furthermore, I find that different firms typically react to their customers’ strategies with the same approach but implement and schedule their implementation in different ways. These differences in the execution and implementation patterns of offshoring and outsourcing also differ among industries.

Global Supply Chains and Transfer Pricing: Insights from a Case Study

Purpose – The purpose of this paper is to integrate the issue of transfer pricing and logistics costs to understand trade statistics and the operation of supply chains by using invoice-level data for a single globally sourced product of a multinational firm.Supply chains are central to understanding wealth creation and capture in an increasingly globalized production system. The increasing disaggregation and dispersal of supply chains is profoundly affecting the geographical distribution of value added, input costs and profits of multinational firms. This suggests that understanding supply chains and where the activities and accounting for these activities take place is crucial for understanding the causes and consequences of contemporary globalization. Design/methodology/approach – By using a case study of a single product and invoice-level data, it was possible to capture the actual costs incurred by a firm using a relatively simple global supply chain. The authors show how corporate intra-firm transfer pricing determines which business unit and location captures profits. A single firm provided the core data in this paper, including product- and firm-level information on intermediate product prices and input costs for all internal transfers. Findings – This paper advances interesting insights into trade in value added and shows that, though not often considered significant, transfer pricing is a critical issue for understanding the geographical distribution of value added. The authors conclude with some observations about the nature of global supply chains, the value of international trade statistics and a hidden advantage of an integrated firm operating on a global scale the ability to somewhat arbitrarily select the activities to which profits should be allocated. For nation states, as supply chains become more international and complex, critical measures, such as gross domestic product, worker productivity, etc., are becoming ever more imprecise. The economic geography of cost of inputs and profits continue to separate as multinational enterprises drive the disaggregation of value creation and value capture. Research limitations/implications – The case study facilitates an understanding of complex supply chain issues, thereby extending and deepening findings from previous research. This case study of transfer pricing in supply chains will assist other scholars in better formulating testable propositions for their studies and sensitize them to the internal complexities corporate managers face when making operationalizing decisions. Originality/value – The case study suggests that understanding the configuration of and accounting in supply chains is vital for accurately measuring any national economic statistics. This case study provides some bottom-up evidence that national accounts and international trade economics undertaken without a deep understanding of supply chain organization is likely to generate misleading results. The methodology of using invoice-level data can provide a more granular understanding of how supply chains are organized and where the value is added and captured. For practitioners, the data suggest that firms should think very carefully about which of their activities generate the most value, and value those accordingly.

Transformations of Mobile Telecommunications Supplier Networks

The aim of this chapter is to advance our understanding of changes in mobile telecommunications supplier networks by answering the following question: how does a lead firm manage its supply networks in global supply chains? Strategic thinking, strategic management and execution play important roles in this management process. In this chapter, I extend the existing literature on strategic thinking by analysing the strategic and operating behaviours of mobile telecommunications supplier networks composed of technology and service firms that are being influenced by the globalisation of the industry and that are operating under a strategically and operatively dominant player: a lead firm. Additionally, I analyse the strategic and operating behaviours of the mobile telecommunications suppliers in the context of two major transformations that occurred during the extraordinary growth of the mobile telecommunications industry from 2000 to 2010. The results of this chapter underscore the significance of understanding economic developments and market requirements as well as the urgency of decision-making. The results of this chapter also highlight the consequences of technology commoditisation and insufficient knowledge regarding spillovers.

How Do Intelligent Goods Shape Closed-Loop Systems?

Disruptive technologies can increase the intelligence of goods and revitalize business models in the circular economy. Applying an industrial ecology perspective, this article discusses how intelligent goods can boost the sustainability of industrial ecosystems. North American and European cases highlight how business model innovators can utilize goods-related information to develop more competitive closed-loop systems. The authors identify three archetypes of closed-loop systems—inner circles, decentralized systems, and open systems—and delineate how they leverage information resources for collaboration. This study advances the understanding of closed-loop systems in the circular economy, which is more dependent than ever on digital platforms.

Expanding the Platform: Smart Contracts as Boundary Resources

Platform businesses are born global, with instant access to global markets. Thanks to the algorithmic, self-executing and self-enforcing computer programmes known as smart contracts, platform businesses now also have instant access to global capital markets from birth. However, the legal status of these smart-contract-enabled funding mechanisms and smart contracts in general is not well defined. In this article, we analyse how well the formation mechanisms of the general principles of Finnish contract law can be applied to the technological framework of smart contracts. We find that depending on the case, smart contracts can create legally binding rights and obligations to their parties. We also observe that contracts have not been formerly perceived as technical boundary resources in the sense that platform ecosystems could foster broader network effects by opening their application contracting interfaces to third parties.

The changing geography and ownership of value creation: evidence from mobile telecommunications

Abstract Through an innovative trade-in-task case study, we explore how Nokia, which is historically one of the most important mobile phone manufacturers in the world, offshored the development and production of three distinct mobile phones at three different points in time. Adjacent to these processes, we find that the value creation in areas such as design and manufacturing knowledge has rapidly shifted away from advanced economies to emerging economies. Moreover, we find that the value added captured by Nokia decreased dramatically over the studied time period. Based on our results, we uss more generally the challenge of multinational corporations to preserve value and how the realisation of the benefits of offshoring must be assessed with respect to the altered requirements for controlling value-adding activities.

Distributed Governance in Multi-Sided Platforms

Over the last decade, blockchain technology has facilitated a method by which a network of equipotent and equally privileged peers can jointly maintain and edit databases in an entirely decentralized manner, without any kind of an intermediary exhibiting unilateral control. As a consequence it has enabled the creation of a new type of multi-sided platform architecture with distributed governance. As the different platform provision functions are opened to free market competition rather than monopolized by a single entity, the monopoly-like pricing structure typical of platforms is overhauled. Instead, blockchain-enabled distributed platforms appear to share value more evenly between the all the different market sides connected to the platform. Our analysis reveals that blockchain technology adds new considerations to how multi-sided platform architectures should be perceived and analyzed.