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Aligning governance mechanisms with task features to improve service capabilities---an empirical study of professional service outsourcing in India

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Abstract

As emerging markets increasingly play important roles in outsourcing, we focus on the complex relationships in the professional service outsourcing environment. Building on information processing and contingency theories, this paper contributes to the much-needed efforts in the study of professional service outsourcing, a new and fast-growing cross-border professional service activity. This study examines the impact of task characteristics and their alignment with inter-firm governance mechanisms in improving service capabilities. Using survey data from 192 Indian professional service providers, we find the relationship between task complexity and service capabilities to be curvilinear in nature. More importantly, contractual governance mechanism works better in dealing with the uncertainties associated with task complexity and connectivity, while administrative governance mechanism does a better job in dealing with the problem of task security. Contractual and administrative mechanisms complement each other in dealing with tasks with high complexity and security issues. Managerial implications are drawn for practicing global clients and offshore service providers regarding how to successfully manage and govern the outsourced professional tasks to achieve expected benefits.

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Notes

  1. In each plot of figures 3 and 4, the horizontal axis represents the level of task characteristics (complexity, connectivity and security) from low (left side) to high (right side), and the vertical axis represents a service provider’s service capabilities. Each plot contains two lines; the dashed line represents low-level governance mechanism (CONT, CONN or ADMT), and the solid line represents high-level governance mechanism (CONT, CONN or ADMT). To interpret these plots, the focus is the difference in the position and slope of those two lines in each plot. Higher position and slope indicate higher impact of task features on service capabilities or a stronger relationship between task features on service capabilities.

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Authors and Affiliations

  1. Data Sciences & Analytics, Great Lakes Institute of Management, Chennai, India

    Vaidyanathan Jayaraman

  2. University of North Georgia, 3820 Mundy Mill Rd, Oakwood, GA, 30566, USA

    Zuoming Liu

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Appendix. Scale items for constructs

Appendix. Scale items for constructs

For the following three governance-associated constructs, the respondents indicated their agreements with the statement on a 1 to 5 scale. (1) indicated not true and (5) indicated very true.

Relational governance mechanism (RELT) (adapted from Uzzi 1999; Heide and John 1992)

  1. a.

    We highly value information sharing across various parties.

  2. b.

    We frequently use personal contacts and share ideas through open communication.

  3. c.

    We established a culture such that every member cooperates with each other in integration.

  4. d.

    Team-work spirit and joint consultation to resolve any problems is undertaken.

  5. e.

    We view the quality of leader-subordinate relationships as a catalyst for process integration.

Contractual governance (CONT) (adapted from Brown et al. 2000; Williamson 1975)

  1. a.

    Our relationship with various members is governed by written contracts.

  2. b.

    We always use formalized rules and agreements that detail the rights of both parties.

  3. c.

    We have a specialized team to design, coordinate and overhaul integration.

  4. d.

    We always stipulate a full plan to guide internal and external integration processes.

  5. e.

    We use very harsh penalty if a party or member fails to fulfill the job. (item dropped)

Administrative governance (ADMT) (adapted from Luo 2002; Choudhury and Sabherwal 2003; Williamson 1975)

  1. a.

    We focus on training to improve the process integration skills.

  2. b.

    We always have team leaders charged with daily administrative duties.

  3. c.

    Every member is clear about daily job descriptions.

  4. d.

    We have administrative manuals for every party member to handle problems.

  5. e.

    We encourage and reward experience sharing. (item dropped)

For the following three task-associated constructs, the respondents indicated their agreements with the statement on a 1 to 5 scale. (1) indicated not true and (5) indicated very true.

Task Complexity (COMP) (adapted from Child and McGrath 2001; Byström 2002; Campbell 1988)

  1. a.

    PSO task is always sophisticated that we have to deploy a large workforce from different units to work on it.

  2. b.

    PSO task fulfillment requires a great deal of specialized knowledge in different disciplines.

  3. c.

    It is extremely difficult to standardize processes and procedures for my company’s outsourcing projects.

Task Connectivity (CONN) (adapted from Sparrow 2003; Willcocks and Lacity 2006)

  1. a.

    To what extent your professional service outsourcing task requires inter-departmental collaboration?

  2. b.

    To what extent your professional service outsourcing task requires coordination across processes?

  3. c.

    To what extent the entire professional service outsourcing project will fail if one process fails?

Task Security (SECU) (adapted from Child and McGrath 2001; Choudhury and Sabherwal 2003)

  1. a.

    The client always attaches the utmost importance to information security.

  2. b.

    Security is our overriding priority in training, services and policy making.

  3. c.

    We have strict and stringent rules in safeguarding customer information.

Service capabilities (CAP): Please rate your business unit, relative to your major competitors in terms of its marketing capabilities in the following areas. Five-point scale with 1 (much worse than competitors) to 5 (much better than competitors) scale anchors. (adapted from Danneels and Kleinschmidt 2001; Brockman and Morgan 2003; Lumpkin and Dess 1996, 2001)

  1. a.

    Ability to develop new types of services

  2. b.

    Developing new services to exploit R&D investment

  3. c.

    Successfully launching new services

  4. d.

    Ensuring that new development efforts are responsive to customer needs

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Jayaraman, V., Liu, Z. Aligning governance mechanisms with task features to improve service capabilities---an empirical study of professional service outsourcing in India. Oper Manag Res 12, 19–39 (2019). https://doi.org/10.1007/s12063-019-00141-z

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  • DOI: https://doi.org/10.1007/s12063-019-00141-z

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