Effects of process and outcome controls on business process outsourcing performance: Moderating roles of vendor and client capability risks

Abstract

Control over outsourced projects is a significant concern for both clients and vendors. Although the effect of control on performance has been studied previously, vendor and client capability risks have rarely been merged into the control–performance relationship. Using paired quantitative data collected from 234 business process outsourcing projects, we empirically determine that outcome control is more effective than process control, although both positively influence the performance of outsourced projects. Vendor and client capability risks play miscellaneous moderating roles on the effects of process and outcome controls on performance. In the presence of high vendor capability risk, the effect of process control on performance is high, but the effectiveness of outcome control is low. By contrast, high client capability risk results in low effectiveness of process control but high effectiveness of outcome control. Different control modes have various attributes and generate different levels of performance. Either vendor or client capability risk serves as a double-edged sword with regard to control. Therefore, the risky situation of both vendors and clients should be considered in the selection and enforcement of control in managing outsourced projects.