The impact of social network information search on the offshoring location decision of

Understanding the theoretical context, this thesis has sought to investigate how social network information search impacts the offshoring location decisions of firms in the DDVC. It is particularly concerned with the extent to which information search in social networks will cause the firms in the cluster to make the same decisions and the amount of information reflected in these decisions.

This focus is specified in the research sub-questions.

The first research sub-question is concerned with the extent to which the firms will search information about the transaction in social networks. Theoretically, firms will be drawn towards particular information sources if they exhibit high expected usefulness (value) given their level of accessibility (costs). Social networks are characterized by reciprocity, meaning that the links are non-directional and that there are no direct information costs. The usefulness of the transaction-specific information within a social network is then conditioned by the level of participation. Having analyzed the industry dynamics of the DDVC, it was found that the firms actively use social networks for information sharing to reduce the transaction costs of the project-based organizational model. Additionally, the characteristics of the transaction led me to anticipate that the general supply of transaction-specific information would be low. Collectively, these factors contributed to the hypothesis that the firms would use social networks to acquire information about potential offshoring partners.

Applying a survey strategy to collect data, it was found that social networks, particularly professional contacts, were important sources of information. However, it also appeared that the social networks do not have monopoly on the firms’ information search. Other sources such as “own research”, “festivals, conferences, fairs, etc.”, “past collaborations”, and “meetings with firms” are also widely used. In conclusion, the findings result in a somehow blurred understanding of the importance of information from social networks. Additionally, because information search is an intangible process, which is not always based on conscious decisions, there are some methodological issues when estimating the ‘importance’ of a specific information source. The conclusions should therefore be treated carefully.

77 The second research question is indirectly related to the local network structures of the DDVC and the process of information diffusion. It was investigated whether social network information search causes homogeneity in offshoring location decisions. Because the industries are highly embedded in social networks, facilitating the project-based organizational model, it was hypothesized that network symmetry would cause homogeneous decision making. In other words, information search in social networks was anticipated to drive homogenous decision making. From a theoretical perspective, the answer to the sub-question essentially comes down to the structures of the social networks in which the firms search for information. If the local network structures were symmetric, the information search would lead to homogenous decision making. Conversely, asymmetric network structures would cause an unequal distribution of information, inducing decisional heterogeneity.

The ideal methodological approach to answering the sub-question would have been to conduct a multinomial regression to test the statistical relationship between social network information search and the offshoring location decisions. However, it was constrained by the weak empirical foundation, making it impossible to reach any form of statistical significance. Instead, the relationships between the two variables were reviewed using descriptive statistics. A few deviations were observed, but no reliable conclusions could be drawn.

Lastly, the third research question considered the extent to which the social networks were clustered around the DDVC. Because social relations thrive under conditions of geographical proximity, it was hypothesized that the social networks would be characterized by internal ties (i.e. the social networks contacts would be located in the DDVC). The answer to this sub-question has two implications for the decision making of the cluster. First, it determines the infusion of information into the cluster. Many external ties to many foreign clusters will cause large amounts of information to infuse into the DDVC, increasing the supply of transaction-specific information.

In contrast, low number of external ties (i.e. a high degree of clustering) will reduce the infusion of information into the cluster. Such a situation is referred to as over-embeddedness (Bliemel and Maine 2009). Second, the external ties also influence whether the firms in the DDVC will make the same offshoring location decisions as other clusters. Scholars argue that, ideally, the network structure of a cluster should hold a combination of internal and external links (ibid.). In the context

78 of information search, this would facilitate the infusion and diffusion of transaction-specific information.

The data collection somehow verified the hypothesis as the social networks were characterized by a negative EI-index, meaning that the majority of the network links were internal. At the same time, a number of external links were also recorded, particularly to countries in the EU. From a theoretical perspective, this should be perceived as a positive indicator for the firms’ decision making, since it increases the infusion of information.

In sum, the weak empirical foundation makes it difficult to draw any certain conclusions about the decision making of the DDVC. In retrospect, due to the complexity and intangible nature of information search and network structures, I question the possibility of fully answering the research question empirically. Assuming that the data foundation was sufficient, it could have been found that social network information search induces homogenous decision making among the firms in the DDVC. Nevertheless, this only reflects the local network structures of the social networks in the DDVC, limiting the generalizability of the study. For example, the findings cannot be generalized to the English cluster, as the process of information diffusion is conditioned by the structures of that particular network. It could be that the social networks in England were highly asymmetric. Social network information search would then cause decisional heterogeneity.

Consequently, I argue that the most elegant explanation as to how information search impacts transaction decision making comes in a theoretical form.

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