Knowledge Process Outsourcing: The challenge to create value through transferring intrinsically tacit knowledge across borders

Abstract

A recent development in the service outsourcing sphere has enabled companies to outsource highly knowledge intensive and strategically important processes. Hence, the characteristics of the knowledge process outsourcing industry are extremely complex and it is difficult to comprehend how value can be created for clients. These aspects are particularly intriguing when considering the fact that the services are offered on distance by companies from emerging market economies through the utilization of low cost expertise. Thus, the purpose of the study is to explore the logic of value creation when knowledge process outsourcing services, which are intrinsically tacit, are offered across borders. In order to elaborate on this phenomenon, theories related to knowledge transfers and professional service firms’ value creation, in particularly the Value Shop framework, have been investigated. The empirical evidence indicates that Indian knowledge process outsourcing service providers have developed techniques and practices in order to cope with the complexity of the industry. Hence, it could be concluded that a very challenging trade-off between cost reduction and tacitness is evident in the Knowledge Process Outsourcing service provider’s operation modes.