Are There Contagion Effects in IT and Business Process Outsourcing?

Decision Support Systems, 51, 4 (November 2011), 864-874

25 Pages Posted: 29 May 2015 Last revised: 5 Jun 2015

See all articles by Arti Mann

Arti Mann

School of Sciences and Computer Engineering, University of Houston Clear Lake

Robert J. Kauffman

Singapore Management University; Singapore Management University - School of Information Systems

Kunsoo Han

McGill University

Barrie R. Nault

University of Calgary - Haskayne School of Business

Date Written: October 14, 2010

Abstract

We model the diffusion of IT outsourcing via announcements about IT outsourcing deals. We estimate a lognormal diffusion curve to test whether IT outsourcing follows a pure diffusion process or there are contagion effects involved. The methodology permits us to study the consequences of outsourcing events, especially mega-deals with IT contract amounts that exceeded US$1 billion. Mega-deals act, we theorize, as precipitating events that create a strong basis for contagion effects and are likely to affect decision-making by other firms in an industry. Then, we evaluate the role of different communication channels in the diffusion process of IT outsourcing by testing for the fit of the mixed influence model at the industry level. This helps us to evaluate the consistency of evidence at two different levels of analysis. We also evaluate two flexible diffusion models: the Gompertz and Weibull models. Our results show that the diffusion patterns of IT outsourcing do not appear to be lognormal, suggesting that IT outsourcing does not follow a pure diffusion process. Instead, we find the presence of contagion effects in the diffusion of IT outsourcing. During periods of the most rapid outsourcing growth – the contagion periods – the actions of the large and more visible firms may provide exemplars for smaller firms, reducing their inhibitions about committing to IT outsourcing. We also find that the results of the mixed influence and the Weibull models, which provide the best fit for overall IT outsourcing diffusion patterns, are potentially indicative of the existence of spillovers that might drive the observed contagion effects at the industry level.

Keywords: Adoption and diffusion, Bass model, contagion effects, economic analysis, influence models, IT services, market announcements, S-curve flexible models, outsourcing, technology adoption.

Suggested Citation

Mann, Arti and Kauffman, Robert J. and Han, Kunsoo and Nault, Barrie R., Are There Contagion Effects in IT and Business Process Outsourcing? (October 14, 2010). Decision Support Systems, 51, 4 (November 2011), 864-874, Available at SSRN: https://ssrn.com/abstract=2606316

Arti Mann

School of Sciences and Computer Engineering, University of Houston Clear Lake ( email )

4800 Calhoun Road
Houston, TX 77204
United States

Robert J. Kauffman

Singapore Management University ( email )

Li Ka Shing Library
70 Stamford Road
Singapore 178901, 178899
Singapore
65-6828-929 (Phone)

Singapore Management University - School of Information Systems ( email )

80 Stamford Road
Singapore, 178902
Singapore

Kunsoo Han

McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada

Barrie R. Nault (Contact Author)

University of Calgary - Haskayne School of Business ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada

HOME PAGE: http://ucalgary.ca/bnault

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
6
Abstract Views
384
PlumX Metrics