Thus, when there is little need to manage either exogenous or endogenous uncertainty, a captive offshoring model is the most desirable option.
QUADRANT II: HIGH ENDOGENOUS UNCERTAINTY AND LOW EXOGENOUS UNCERTAINTY
The proprietary knowledge and capabilities developed as a result of coping with endogenous uncertainties can then be used by the firm to manage the endogenous uncertainty in other host countries (Luo, 2002).
One endogenous uncertainty faced by offshore client firms includes the offshore location's cultural uncertainty.
The real options literature posits that in order to resolve endogenous uncertainty firms must undertake projects in stages so that learning can occur incrementally (Chang 1995; Folta, 1998).