The Impact of Distance on Offshore Business Relationships

Offshoring can reduce the production cost of an activity. At the same time, it can generate additional management costs. This paper develops a model explaining the main drivers of the efforts required to manage offshore activities. Results show that distance plays an important role in the determination of the effort level. However, it is not simply a cultural or geographical but a more complex notion labelled “perceived distance”. IT played an interesting role in the determination of effort. It facilitated a higher formalization of the information exchanged and mitigated the impact of geographical distance on the effort required.
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