Augmenting Conflict Resolution with Informational Response: A Holistic View of Governance Choice in Business Process Outsourcing

Barua, A and Mani, D (2014) Augmenting Conflict Resolution with Informational Response: A Holistic View of Governance Choice in Business Process Outsourcing. Journal of Management Information Systems, 31 (3). pp. 72-105.

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We develop a holistic model of governance choice in business process outsourcing (BPO) that represents a highly information-intensive form of outsourcing. We integrate perspectives from neoinstitutional economics and the information-processing view (IPV) of the firm. We argue that the governance structure in BPO is chosen not only to address opportunism concerns arising from relational uncertainty to and encourage cooperation, as suggested by institutional economics, but also as an informational response to task and relational uncertainty to encourage coordination between exchange partners. Using the lens of IPV, we posit that uncertainty in the outsourced task increases the information requirements (IR) of the BPO relationship, which, in turn, leads to more hierarchical governance structures. We also suggest that in addition to directly influencing governance choice, relational uncertainty, a key construct in transaction cost economics (TCE), increases IR, and hence has an indirect impact on governance choice. Furthermore, we hypothesize that technological capabilities enable more hierarchical governance in response to increasing IR needs. Data on 130 BPO initiatives provide empirical support for our hypotheses regarding the drivers of IR, its impact on governance choice, and the moderating role of technological capabilities. Our study contributes to theory by integrating the premises of TCE and IPV in the context of BPO, and to practice by underscoring the need to consider information requirements in designing appropriate coordination and collaboration processes.

Affiliation: Indian School of Business
ISB Creiators:
ISB Creators
Mani, D
Item Type: Article
Uncontrolled Keywords: outsourcing, cooperation, coordination, governance, hierarchy, information requirements, uncertainty
Subjects: Information Systems
Information Technology and Economy
Depositing User: Veeramani R
Date Deposited: 13 Oct 2018 13:28
Last Modified: 13 Oct 2018 13:28
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