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ERIC Number: ED516592
Record Type: Non-Journal
Publication Date: 2010
Pages: 191
Abstractor: As Provided
ISBN: ISBN-978-1-1240-2053-2
Governance Mechanisms in Information Technology Outsourcing
Ravindran, Kiron
ProQuest LLC, Ph.D. Dissertation, University of California, Irvine
While the dominance of Information Technology Outsourcing (ITO) as a sourcing strategy would seem to indicate successful and well-informed practice, frequent examples of unraveled engagements highlight the associated risks. Successful instances of outsourcing suggest that governance mechanisms effectively manage the related risks. This dissertation consists of three related essays; the first studies the risky, and therefore interesting, practice of asset transfer, while the next two essays examine complementary mechanisms to mitigate the risk of outsourcing. Before proceeding with the formal analyses, I first present a brief overview of the industry structure and draw out critical issues. From examples of failed outsourcing engagements, I summarize the salient governance issues and the role of contracts in successful governance. Asset Transfer, a common element in ITO, amplifies the inherent challenges associated with outsourcing by placing both parties in a situation of bilateral dependence. Resource Based View and Property Rights Theory offer rationales for this risky practice; however, either theory by itself offers incomplete predictions on the suitability of an asset for transfer. Therefore, in my first essay, I propose a framework that combines the predictions of both theories to describe candidate assets for transfer. I test this using two well-regarded cases in outsourcing. In the next chapter, I address the central role of asset transfer and contract structure in outsourcing. I develop a theoretical framework to derive propositions on how contracts mitigate this risk of opportunistic behavior. Using econometric analysis, I compare ITO contracts that include asset transfer to those that do not. I show that contract design is significantly affected by asset transfer. Further, I find that several clauses complement each other in protecting both parties against the risks associated with asset transfer. Prior research has established that "relational" governance complements formal contractual governance. However, both rely on stringent assumptions about the mechanism of enforcement. In my final essay, I propose a third alternative based on a firm's position in an inter-organizational network of trading partners. This network acts as a conduit for the exchange of information on the trade relationship. A centrally located firm is more widely observed and as a result, its position in the network is likely to serve as an implicit deterrence to opportunistic behavior. Based on a large dataset of public ITO announcements, I find that being associated with central trading partners is likely to predict longer contract duration even after controlling for a number of alternate causal explanations. [The dissertation citations contained here are published with the permission of ProQuest LLC. Further reproduction is prohibited without permission. Copies of dissertations may be obtained by Telephone (800) 1-800-521-0600. Web page:]
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Publication Type: Dissertations/Theses - Doctoral Dissertations
Education Level: N/A
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: N/A