Paper to be presented at the Summer Conference 2010 on "Opening Up Innovation: Strategy, Organization and Technology" at Imperial College London Business School, June 16 - 18, 2010 SHIFTING FIRM BOUNDARIES IN GLOBAL SERVICES SOURCING: TRANSACTION COSTS, EMERGING CAPABILITIES AND EXPERIENCE-BASED LEARNING Carine Peeters ULB - Solvay Brussels School of Economics and Management carine.peeters@ulb.ac.be Arie Lewin Duke University ayl3@duke.edu Stephan Manning Boston University stephan.manning@umb.edu Silvioa Massini Manchester University silvia.massini@mbs.ac.be Abstract: Recent trends towards sourcing business services globally either through captive or outsourced delivery models have drastically changed the vertical scope of multinational enterprises. Extant research builds mainly on transaction cost economics and the capabilities view of the firm arguments to explain global sourcing decisions. Based on longitudinal project-level data from the Offshoring Research Network, this paper tests the explanatory scope of these theories and explores alternative firm and industry level explanations as well as the role of time. Findings suggest that outsourcing decisions are barely influenced by task and transaction characteristics. Rather, governance model choices can be explained initially by national origin of the firm and later on, as the extent of offshoring increases, by firm-specific sourcing experience and learning effects, prior experiments with captive and outsourced models and the increasing industry availability of specialized service providers over time. Findings support recent dynamic conceptualizations of transaction costs and firm-level capabilities and call for an integration of the geographic dimension into theories of firm boundaries. JEL - codes: M10, -, -