Offshoring is the practice of outsourcing operations or work overseas. This can take two forms: outsourcing to a third-party (offshore outsourcing) or ownership and operation of an affiliated offshore entity (AOE). Offshoring has been traditionally confined to the manufacturing industry or low-skilled tasks, but in recent years has also become prevalent in the services sector and highly skilled roles, including professional services (e.g., legal, accounting, management consulting), technical services (e.g., architecture, engineering), and IT services. Prior research on service offshoring has focused on areas such as management, economics, public policy, or international business, but there has been little attention on its influence on marketing activities and on the B2B services, which this study will address.
Although offshoring can bring benefits such as cost saving or increasing capacity, businesses face a conundrum of complying with the legal requirement to disclose offshoring of services while dealing with customer’s opinion of morality of these practices. Previous research shows that consumers often react with negative emotions to the offshoring of services because of ethical and moral concerns relating to perceived job losses and perceived risk of receiving lower quality services.
Therefore, this research aims to study the impact of proactively disclosing offshoring of B2B services on customer reactions and marketing outcomes. Since thinking about the past or future can elicit different responses, this research also examines the impact of the temporality (past versus future offshoring) of disclosure on customer reactions. Moreover, to understand how these reactions occur, the study focuses on two mechanisms: the hostility triad (anger, disgust, and contempt) and the feeling of betrayal (a perception of violation of morality and trust in the service relationship).
The overarching goal of this study is to examine how different types of disclosure of offshoring B2B services (disclosure vs. non-disclosure, past offshoring vs. future offshoring) influences negative emotional reactions (contempt, anger, disgust) and perceptions of betrayal and how this then ultimately impacts B2B service outcomes (negative WOM and attitudinal loyalty).
Method and sample
This study used an online survey to collect data from a sample of 213 participants, recruited from a market research online panel. Through screening questions, participants were required to be an owner operating or working for a business in Australia that used an external accounting firm. They were then randomly assigned to one of four scenarios: (1) disclosure of past offshoring, (2) non-disclosure of past offshoring, (3) disclosure of future offshoring, and (4) non-disclosure of future offshoring. All measures (the hostility triad, perceived betrayal, negative WOM, and attitudinal loyalty) were based on existing scales from the literature using 7-point Likert scales.
Key findings
In general, non-disclosure of offshoring practices would result in much higher levels of negative emotions compared to disclosure. The four scenarios of disclosure versus non-disclosure combined with the temporality factor gave different results. Specifically, non-disclosure generated a significantly higher level of negative emotions than disclosure of past offshoring. Disclosure of past offshoring generated more negative emotions than disclosure, while non-disclosure of past and present offshoring did not significantly differ.
Results demonstrate that the effects of disclosure form a chain reaction. Non-disclosure of offshoring significantly increases the hostility triad, which in turn increase consumers’ sense of betrayal. This interaction is influenced by time, with customers feeling more critical of future offshoring than past offshoring because they perceive this as more distant and uncertain.
In terms of service outcomes, results show that the hostility triad significantly increases betrayal and negative WOM while decreasing loyalty. The feeling of betrayal also directly increases negative WOM and decreases loyalty. Finally, loyalty was found to significantly reduce negative WOM.
Recommendations
First, B2B service providers should ensure they are proactive in their disclosure of offshoring. They are encouraged to be confident and seek appropriate ways to directly communicate with customers (e.g., face-to-face or via emails). By being proactive, they can better frame the disclosure of relationship changes and how this is communicated to customers. For instance, positive aspects of the changes can be highlighted to combat negative emotions, and the business should be forthright and honest to mitigate customers’ feeling of betrayal.
Second, emotions play a critical role in understanding and managing B2B relationships, particularly when the nature of the relationship may change. It is important that managers of B2B service providers are trained and practice emotional intelligence to find positive ways to relieve stress, communicative effectively and empathize with clients regarding the changes to their B2B relationship. When changes happen, service providers should first address their clients’ emotional concerns before focusing on the functional benefits of cost saving and efficiencies.
Finally, a new order for proactive disclosure of offshoring is recommended. Instead of disclosing this in initial engagement letters to a new client, managers should first initiate an interpersonal conversation in-person or over the phone with the client. This would be a chance to highlight any issues in the engagement letter that may be sensitive for the client and may generate an emotional response. From this, the manager can gauge the reaction and adapt their response to explain the benefits to the client and ease their concerns. Through open but cautious disclosure and personalising the information and communication experience to the client’s needs or fears, all issues can be addressed in advance and the service provider can build a trusted relationship with their client.
Researcher
More information
The research article is also available on eprints.