The impact of outsourcing on domestic capabilities , slowly leading to the decline of their competitive advantage. Pisano and Shih (2012a) argue that “mass migration from the manufacturing sector has seriously eroded the national capabilities needed to transform inventions into high-quality, competitively priced products…”. Looking at Kodak, in the 1960s and 1970s its profits came from selling color film, not cameras. So he let his lens, shutter, and other mechanical components stand still while other Japanese companies like Canon, Nikon, and Minolta took over film cameras. instead. However, as the company tried to expand its digital camera business, most of its components came from Asia: memory cards, rechargeable batteries, electronic sensors, etc. Kodak had lost its manufacturing capacity and with it the ability to innovate in the crucial components of a camera. (Pisano 2012a) Naghavi and Ottaviano (2009) proposed a model in which offshoring is associated with less feedback from the offshored production plant to national innovation divisions and more coordination problems slowly leading to less product innovation. This is especially true in industries where R&D is cheap and product differentiation is strong. Fuchs and Kirchain (2005) also suggest that “the static economies of offshore manufacturing…lead to dynamic diseconomies, particularly disincentives for innovation.” Variety of Operational Risks Another disadvantage would be operational risks. There could always be a risk of increased costs, over-reliance on one supplier, exploitation of knowledge transfer and even decreased product quality...... middle of paper ...... same development and jobs in the North American clothing industry. Global Networks, (online) Volume 3, pages 143–69. Available at: http://onlinelibrary.wiley.com/doi/10.1111/1471-0374.00054/pdf (assessed April 25, 2014)38. Levy, DL (2005), Offshoring in the new global political economy. Journal of Management Studies, (online) Volume 42 Pages 685-693. Available at: http://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2005.00514.x/full (assessed April 21, 2014)39. Storper, M. (1997). The regional world: territorial development in a globalized economy. London: Guildford Press.40. Waldman, A. (2004). "What India's Upset Vote Reveals: High Tech Is Shallow". New York Times, (online), May 15, page 6. Available at: http://www.nytimes.com/2004/05/15/world/what-india-s-upset-vote-reveals-the- high-tech-is-skin-deep.html (reviewed April 23 2014)

Essay / The impact of outsourcing on domestic capabilities , slowly leading to the decline of their competitive advantage. Pisano and Shih (2012a) argue that “mass migration from the manufacturing sector has seriously eroded the national capabilities needed to transform inventions into high-quality, competitively priced products…”. Looking at Kodak, in the 1960s and 1970s its profits came from selling color film, not cameras. So he let his lens, shutter, and other mechanical components stand still while other Japanese companies like Canon, Nikon, and Minolta took over film cameras. instead. However, as the company tried to expand its digital camera business, most of its components came from Asia: memory cards, rechargeable batteries, electronic sensors, etc. Kodak had lost its manufacturing capacity and with it the ability to innovate in the crucial components of a camera. (Pisano 2012a) Naghavi and Ottaviano (2009) proposed a model in which offshoring is associated with less feedback from the offshored production plant to national innovation divisions and more coordination problems slowly leading to less product innovation. This is especially true in industries where R&D is cheap and product differentiation is strong. Fuchs and Kirchain (2005) also suggest that “the static economies of offshore manufacturing…lead to dynamic diseconomies, particularly disincentives for innovation.” Variety of Operational Risks Another disadvantage would be operational risks. There could always be a risk of increased costs, over-reliance on one supplier, exploitation of knowledge transfer and even decreased product quality...... middle of paper ...... same development and jobs in the North American clothing industry. Global Networks, (online) Volume 3, pages 143–69. Available at: http://onlinelibrary.wiley.com/doi/10.1111/1471-0374.00054/pdf (assessed April 25, 2014)38. Levy, DL (2005), Offshoring in the new global political economy. Journal of Management Studies, (online) Volume 42 Pages 685-693. Available at: http://onlinelibrary.wiley.com/doi/10.1111/j.1467-6486.2005.00514.x/full (assessed April 21, 2014)39. Storper, M. (1997). The regional world: territorial development in a globalized economy. London: Guildford Press.40. Waldman, A. (2004). "What India's Upset Vote Reveals: High Tech Is Shallow". New York Times, (online), May 15, page 6. Available at: http://www.nytimes.com/2004/05/15/world/what-india-s-upset-vote-reveals-the- high-tech-is-skin-deep.html (reviewed April 23 2014)

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