The stability of offshore outsourcing relationships: the role of relation specificity and client control

Manning, Stephan, Lewin, Arie Y and Schuerch, Marc (2011) The stability of offshore outsourcing relationships: the role of relation specificity and client control. Management International Review, 51 (3). pp. 381-406. ISSN 0938-8249

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Abstract

Offshore outsourcing of administrative and technical services has become a mainstream business practice. Increasing commoditization of business services and growing client experience with outsourcing have created a range of competitive service delivery options for client firms. Yet, data from the Offshoring Research Network (ORN) suggests that, despite increasing market options and growing client quality and cost efficiency expectations, clients typically renew provider contracts and develop longer-term relationships with providers. Based on ORN data, this paper explores drivers of this phenomenon. The findings suggest that providers promote contract renewal by making client specific investments in software, IT infrastructure and training, and by involving clients in outsourcing operations, thereby increasing relation specific joint equity and creating opportunities for client monitoring and control. Interestingly, these strategies apply to routine rather than knowledge-intensive tasks, and are more likely to be applied by large rather than small providers. Surprisingly, high degree of contract specification makes contract renewal less likely. The paper contributes to the growing literature on strategic outsourcing of business services and the importance of governance mechanisms addressing ‘hidden costs’ as well as ‘hidden benefits’ of offshore outsourcing relationships.

Item Type: Article
Keywords: Offshore outsourcing, strategic outsourcing, agency theory, service contracting, hidden costs, governance mechanisms
Schools and Departments: School of Business, Management and Economics > Business and Management
Subjects: H Social Sciences > H Social Sciences (General)
Related URLs:
Depositing User: Stephan Manning
Date Deposited: 27 Sep 2019 10:29
Last Modified: 27 Sep 2019 10:30
URI: http://sro.sussex.ac.uk/id/eprint/86266

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