Can Outsourcing of Information Technology Foster Innovations in Client Organizations? An Empirical Analysis

Forthcoming, MIS Quarterly

45 Pages Posted: 10 Sep 2013 Last revised: 2 Dec 2018

See all articles by Anjana Susarla

Anjana Susarla

Michigan State University - The Eli Broad College of Business and The Eli Broad Graduate School of Management

Tridas Mukhopadhyay

Carnegie Mellon University - David A. Tepper School of Business

Date Written: December 1, 2018

Abstract

There is a substantial body of literature on information technology (IT) outsourcing. However, little is known about employing IT outsourcing to generate innovation. In this paper, we articulate the ex ante as well as ex post contracting challenges that could preclude firms from realizing such business value through outsourcing. We develop and test a model linking innovation in IT outsourcing (process innovation and service innovation) to two complementary solutions to the contractual problems: credible commitments and contingent control rights. Alternative empirical estimation approaches support the basic thesis that contractual solutions are complementary in their association with enhanced innovation performance. Our study suggests that portfolios of complementary contractual provisions need to simultaneously address ex ante and ex post hazards through contract design in the outsourcing of innovative tasks. Theoretical and practical implications are explicated.

Keywords: Contract Design, Control Rights, Innovation, Inter-Organizational Relationships

JEL Classification: O31, O32, L14, L86

Suggested Citation

Susarla, Anjana and Mukhopadhyay, Tridas, Can Outsourcing of Information Technology Foster Innovations in Client Organizations? An Empirical Analysis (December 1, 2018). Forthcoming, MIS Quarterly. Available at SSRN: https://ssrn.com/abstract=2323023 or http://dx.doi.org/10.2139/ssrn.2323023

Anjana Susarla (Contact Author)

Michigan State University - The Eli Broad College of Business and The Eli Broad Graduate School of Management ( email )

East Lansing, MI 48824-1121
United States

Tridas Mukhopadhyay

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States
412-268-2307 (Phone)

HOME PAGE: http://web.gsia.cmu.edu/display_faculty.aspx?id=102

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