The Market for Complexity Arbitrage: Process Structure and Market Outcomes in
Offshore Sourcing Of Services – Evidence from Field Research
Ravi Aron, USC Marshall
Abstract
We investigate the link between process complexity and output quality in the offshore
outsourcing of information-intensive services. Our field research shows that process
complexity estimates vary widely between regions. We define a construct called the
Structured Work Index (SWI) that measures the extent to which a process consists of
tasks that involve analysis and quantitative work. We show that processes with high SWI
are rated as being of low complexity by Asian managers while they are rated as being of
high complexity by their ‘western’ counterparts and vice versa. We also investigate the
links between process complexity and the quality of output. Our research shows that
Asian firms generally produce higher quality of output when they work on processes that
they rate as being of high complexity. Our findings are based on data collected from
field research in several countries.