The moderating effect of asset specificity in relationship between relational exchange characteristics and information systems outsourcing partnership.

Author:Kim, Sung

    As information systems (IS) outsourcing expands its scope of outsourcing areas and its portion in the total IS expenditures increases, IS outsourcing has become a fundamental issue in management of information systems. Previously, empirical studies in IS outsourcing has mainly focused on the determinants of IS outsourcing decisions. Recently, however, considerable efforts are under way to investigate the success factors influencing the implementation of IS outsourcing, reflecting the fact that actual implementation rather than decision to outsource become of more practical concern and research in the IS outsourcing area is moving toward more mature stage.

    One of the basic premises of previous studies in both empirical and descriptive studies has been that partnerships between client firms and vendors play a critical role for the successful implementation of IS outsourcing. Some researchers (Baloh et al. 2008; Lam & Han 2005; Fitzgerald & Willcocks 1994; McFarlan & Nolan 1995) essentially view IS outsourcing as strategic alliances or partnerships and emphasize the importance of managing outsourcing relationships. Empirical studies (Aubert et al., 2004; Dibbern et al., 2004; Cho & Jeon 1998; Chung 1997; Grover et al., 1996; Lee 1998) also have found some evidence that the quality or extent of partnership between client firms and vendors is positively related to the successful implementation of IS outsourcing.

    Overall, given the amount of evidence presented by empirical studies, partnership seems to have a positive impact on IS outsourcing implementation. However, one study's (Chung 1997) evidence was somewhat plagued by inconclusive and often contradictory results. For instance, in his study, one of the partnership characteristics, the role integrity has a negative impact on the success of IS outsourcing. This study is an attempt to seek explanations for such equivocal results and to add knowledge on the role of partnership in the implementation of IS outsourcing.

    The basic premise of this study is that the effect of partnership characteristics on IS outsourcing implementation might depend upon contingency factors, such as outsourcing task characteristics. Contingency factors might help determine when, what kind of, and how much partnership building is appropriate. Specifically, this study will investigate the interaction effect of asset specificity on the relationship between partnership characteristics and IS outsourcing performance. A partnership characteristic in this study is based on the relational exchange theory.


    Figure 1 presents the research framework employed in this study. The five independent variables of relational exchange characteristics represent attributes of partnership between client firms and vendors.


    Success in IS outsourcing implementation, the dependent variable, is measured by perceived benefits from a focal outsourcing relationship. One moderating variable, asset specificity, is in place to test the interaction effect between relational exchange characteristics and perceived benefits. The research model will test the direct relationships between the independent variables and the dependent variable as well.

    2.1 Relational Exchange Characteristics

    This study utilizes relational exchange characteristics to capture the attributes of partnership in IS outsourcing relationships since they represents a very systematic set of attributes to capture the extent and dimensions of partnerships in interorganizational relationships (IORs), such as IS outsourcing. Relational exchange theory, as Macneil's (1980) neoclassical contractual framework is often called, expanded Williamson's (1975) initial description of market versus hierarchy of the interorganizational governance structure. The theory suggests that the governance structure can be arranged on a continuum of relationalism anchored by market (discrete exchange) and hierarchy (relational exchange) at the polar extremes (Noordewier et al. 1990). The concept of interorganizational structure or relational structure presented in the relational exchange theory provides a significant opportunity to study hybrid forms of interorganizational cooperative arrangements, which are neither markets nor hierarchies.

    Discrete exchange is relatively short-term, and the relationships between highly autonomous buyers and sellers are designed to facilitate economically efficient transfer of goods or services (Ring & Van de Ven 1992). Communication between parties is very limited and the contents are very narrow. Since virtually no social exchange is engaged, the identity of parties can be completely ignored. Whereas, in relational exchange, each transaction must be viewed in terms of its history and its anticipated future. The participants are expected to derive complex, personal, non-economic satisfaction and engage in social exchange (Dewyer et al. 1987).

    Researchers in relationship marketing and strategic alliances have used a variety of sets of dimensions to measure the relational structure based on the situational factors of the research settings. Among these dimensions, the present study utilizes solidarity, continuity expectation, role integrity, flexibility, and monitoring of the vendor as the characteristics of relational structure. The first four items, solidarity, continuity expectation, role integrity, and flexibility, are included since these items are among the most frequently utilized. The remaining item, monitoring of the vendor, is included since it is considered a very important success factor in an IS outsourcing relationship by researchers.

    The norm of solidarity refers to the extent to which an on-going relationship (as distinct from a series of discrete transactions) is created and sustained (Hunt et al. 1975). The norm of continuity expectation refers to the expectation of future exchange...

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