Vendor Firms Research Articles

Relational dynamics in information technology outsourcing: An integrative review and future research directions

AbstractThis paper reviews the literature on relational dynamics in information technology outsourcing (ITO) relationships, a type of interorganizational relationship (IOR) between client and vendor firms that can vary considerably in complexity. While relational dynamics are understood to reflect changes in an IOR ex‐post contract which can substantially influence relationship performance and development, prior IOR research is limited in its conceptualization. The extensive ITO literature offers fertile ground for exploring this limitation but has advanced different conceptualizations and is fragmented in empirical findings, which warrants a systematic assessment. We conduct an integrative review of 127 peer‐reviewed empirical studies to enhance our understanding of the constituents of relational dynamics. The findings reveal that relational dynamics involve the occurrence and management of tensions within and across four relationship development stages (transactional, strategic, transformational, and termination). For each stage and between stages, we identify the main tension, the firms’ strategies to manage the tension, and the outcomes. Based on these findings, we develop an integrative framework that offers a comprehensive and multifaceted conceptualization of relational dynamics, revealing that as ITO arrangements progress (or regress), partner firms are confronted with structural and transitional tensions inherent in relationship stability and instability. Based on this framework, we offer future directions for developing a more comprehensive understanding of relational dynamics in ITO and, more broadly, IORs.

Managing ad hoc sales encounters in B2B markets

Research in B2B markets has extensively investigated the role of long-term relationships between vendor firms and their customers. That research has focused on long-term personal relationships and trust between a vendor's sales rep – the key representative of the vendor firm – and B2B customers based on frequent sales encounters. However, in many B2B contexts, especially when serving small accounts whose buying potential are small, sales reps typically have no pre-existing personal relationship with the customer, who encounters the sales rep for the first time. These ad hoc encounters can create distrust in the sales rep, harming the trusting relationship between the buying and the vendor firms. The authors investigate selling behaviors that reduce the negative effects of such distrust. Using data from a telecommunications firm, the results show that distrust in the sales rep has a negative effect on vendor trust, lowering sales performance. However, the authors find that those negative consequences are mitigated if sales reps use relational selling behavior but are exacerbated by functional selling behavior. Finally, the authors show that the effectiveness of functional selling behavior depends on the amount of time a sales rep spends with a customer, while the effectiveness of relational selling behavior does not.

Gaining Customer Loyalty with Tracking Information Quality in B2B Logistics

ABSTRACT Although vendor firms invest heavily in technologies to digitalize business-to-business (B2B) service orchestration, little is known about the mechanisms through which high quality information, a key resource generated from digitalization, creates customer loyalty. Positioning our work in the B2B logistics services context, we take a customer needs fulfillment perspective to understand value creation and capture from digitalization of service orchestration in B2B logistics relationships. We suggest that a vendor will capture exchange value, manifesting as customer loyalty, for the customer’s perceived use value of the service enabled by tracking information quality on service orchestration. We propose that service flexibility and service efficiency provided by the logistics vendor are two types of use value for customers, which serve as the value-creation pathways through which tracking information quality affects customer loyalty, the exchange value received by the vendor. We further argue that service modal variety, a key aspect of service complexity, moderates the value-creation pathways of tracking information quality. Using survey and archival data of B2B relationships between a Fortune 100 logistics vendor and its major customers, we find empirical support for the use value mechanisms through which tracking information quality affects customer loyalty in the context of B2B logistics services.

Exploring the Customer Journey of Voice Commerce: A Research Agenda

Voice commerce creates unprecedented opportunities for consumers and vendor firms to interact, engage, and relate. With artificial intelligence-powered voice assistants, consumers can make technology-mediated purchases without using their tactile senses, which represents a new space for commercial interactions. Drawing on the customer journey as an organizing framework, this article proposes a structured research agenda, in an attempt to shed light on the bright side effects of voice commerce while also acknowledging concerns for consumer protection and society in general. Voice assistants can enhance every stage of the purchase journey, yet their use might have negative consequences for customer relationships. In the prepurchase stage, voice assistants can act as information curators or manipulators. In the purchase stage, voice assistants can adopt roles as shopping concierges or impediments. In the postpurchase and usage stage, voice assistants can become trusted relationship partners or hostile intruders in consumers’ lives.

Exploring the Customer Journey of Voice Commerce: A Research Agenda

Voice commerce creates unprecedented opportunities for consumers and vendor firms to interact, engage, and relate. With artificial intelligence-powered voice assistants, consumers can make technology-mediated purchases without using their tactile senses, which represents a new space for commercial interactions. Drawing on the customer journey as an organizing framework, this article proposes a structured research agenda, in an attempt to shed light on the bright side effects of voice commerce while also acknowledging concerns for consumer protection and society in general. Voice assistants can enhance every stage of the purchase journey, yet their use might have negative consequences for customer relationships. In the prepurchase stage, voice assistants can act as information curators or manipulators. In the purchase stage, voice assistants can adopt roles as shopping concierges or impediments. In the postpurchase and usage stage, voice assistants can become trusted relationship partners or hostile intruders in consumers’ lives.

The impact of knowledge flows on asset specificity from the perspective of open innovation

PurposeThis study aims to examine how different modes of knowledge flows affect the changes of asset specificity and how ownership control moderates the relationship between knowledge flows and asset specificity in the open innovation paradigm.Design/methodology/approachThis paper selects information technology outsourcing as the research base. It uses the feasible weighted least squares modeling method for its analysis and has collected the data from 2,369 research and development contracts of multinational vendor firms in China.FindingsThe coupled and outbound knowledge flows have a direct and positive effect on asset specificity. Moreover, the results show that weak corporate control has significant moderating effects on the relationship between both coupled and outbound knowledge flows and asset specificity; the strong control positively moderates the relationship between outbound knowledge flows and asset specificity.Practical implicationsIn open innovation, firms build a higher degree of asset specificity to maximize the efficiency of knowledge flows, which then helps them to enhance innovation capacity and market performance.Originality/valuePreceding studies have tended to examine the influences of asset specificity as an independent variable in a closed innovation paradigm. Asset specificity is hence often left as the antecedent “black box.” This paper, however, opens the “black box” of asset specificity, which is set as a dependent variable, by investigating the influences of knowledge flows on the asset specificity in the context of open innovation. It also reinterprets the role of asset specificity by adopting the lens of open innovation theory.

Assessing the Performances of Vendor Firms by Optimization Technique Industry 4.0 GSC Architectures

Green supply chain is the process used for diminishing the exploitation of resources and producing sustainable technological development. The aim of the research work is to build the proficient Industry 4.0 green architectures index for assessing the feasible candidate choice. In the research work, a crisp numbers set-based MOORA-FMF advanced technique is executed for examining the Industry 4.0 green architectures of vendors firms. The managers are assisted with an Industry 4.0 green architectures index with optimization technique to quantify the performances of alternatives. Therefore, a real case study of a steel manufacturing plant is carried to simulate the proposed Industry 4.0 GSC architectures. Eventually, the results are presented in the conclusion.

Value Gains in Business Process Outsourcing: The Vendor Perspective

Business Process Outsourcing (BPO) is a contemporary phenomenon that has gained significant traction in recent years. Like other forms of outsourcing, BPO is both beneficial and risky. While extant research has examined the risks in outsourcing for clients, a limited insight exists on the risks associated with BPO for vendors. We examine the contexts in which the value proposition of BPO varies for vendor firms based on the risks associated with the contract. The risk in this context is posited to vary based on the type of task outsourced, the outsourcing motivation of the client and the duration of the contract. Using a sample of 231 BPO announcements over a thirteen-year period, we test our hypotheses using an event study. We find that BPO creates significant value gains for vendor firms, particularly for knowledge intensive processes. In addition, vendors lost value when they were sought out to develop specific capabilities for the clients that involved knowledge intensive processes. While vendors benefited from longer duration contracts, these benefits were not found to significantly vary across the different types of tasks outsourced.

Does R&D offshore outsourcing improve innovation in vendor firms from emerging economies? A study of biopharmaceutical industry in India

PurposeWhile the phenomenon of R&D offshoring has become increasingly popular, scholars have mostly focused on R&D offshore outsourcing from the point of view of the client firms, who are often from an advanced country. By examining vendor firms, in this paper the authors shift the focus to the second party in the dyadic relationship of R&D offshore outsourcing. Specifically, the authors compare vendor firms with nonvendor firms from the same emerging economy and industry to look at whether vendor firms from emerging economies can improve their innovation performance by learning from their clients. The authors also look at the role of depth and breadth of existing technological capabilities of the vendor firm in its ability to improve its innovation performance.Design/methodology/approachThis study is based on firm-level data from the Indian biopharmaceutical industry between 2005 and 2016. The authors use the Heckman two-stage model to control for self-selection by firms. The authors compare the innovation performance of vendor firms with nonvendor biopharmaceutical firms (group vs nongroup analysis) as well as innovation performance across vendor firms (within group comparison).FindingsThe authors find that, compared to nonvendor firms, R&D offshore outsourcing vendor firms from emerging economies have higher innovation performance. The authors argue that this higher innovation performance among vendor firms is due to learning from their clients. Among vendor firms, the authors find that the innovation gains are contingent upon the two factors of depth and breadth of the vendor firms' technological capabilities.Research limitations/implicationsThis paper makes three contributions: First, the authors augment the nascent stream of research on innovation from emerging economy firms. The authors introduce a new mechanism for emerging economy firms to learn and upgrade their capabilities. Second, the authors contribute to the literature on global value chains, by showing that vendor firms are able to learn from their clients and upgrade their capabilities. Third, by examining the innovation by vendor firms, the authors contribute to the R&D offshore outsourcing, which has largely focused on the client.Practical implicationsThe study findings have important implications for both clients and vendors. For client firms, the authors provide evidence that knowledge spillovers do happen, and R&D offshore outsourcing can turn vendors into potential competitors. This research helps firms from emerging economies by showing that becoming vendors for R&D offshore outsourcing is a viable option to learn from foreign firms and improve innovation performance. Going outside geographic boundaries may be a large hurdle for these resource-strapped, emerging economy firms. Providing offshore outsourcing services for narrow slices of R&D activities may be a starting point for these firms to upgrade their capabilities.Originality/valueThis paper is among the first to quantitatively study the innovation performance of vendor firms from emerging economies. The authors also contribute to the nascent literature on innovation in emerging economy firms by showing that providing R&D offshore outsourcing services to client firms from advanced countries can improve firms' innovation performance.

IT Outsourcing and Vendor Cost Improvement Strategies under Asymmetric Information

ABSTRACTIn this article, we study the scenario under which two information technology (IT) vendor firms compete for the outsourcing requirements of a client firm. The vendors' cost structures are private information. In addition, the vendors can improve their unit costs through learning‐by‐doing and by making investments in process improvement, that is, induced learning. We study the impacts of vendor‐based learning and process improvement in the asymmetric cost setting on the client firm's outsourcing strategy and the vendor firms' process improvement investments. Our analysis reveals that the client firm may adopt the single‐sourcing strategy or a combination of dual and single‐sourcing strategies depending on the learning efficiency of the vendor base. We also find that high heterogeneity in the vendor cost structure increases the first‐period outsourcing requirements of the client firm. Our findings provide interesting managerial implications for the IT outsourcing industry.

Collaboration under outcome-based contracts for information technology services

The accelerated expansion of markets and intense competition have motivated firms to collaborate closely with vendor firms by outsourcing critical aspects of the business, including Information Technology services. We analyze the interaction between a service provider and a client in which they collaborate to deliver services. We assume that revenue generated from the service depends on their efforts. The client determines retail price and marketing efforts while the service provider decides on quality improvement efforts in the services. We analyze the impact of revenue share proportion on the effort exerted by both firms and the impact of the capability of the service provider on the retail pricing of the service. We develop an analytical framework to characterize the actions of the service provider and the client.

Strategic outsourcing in SMEs

PurposeSo far, there are very few empirical research studies available on the outsourcing pattern among small- and medium-sized enterprises (SMEs). The purpose of this paper is to examine strategic outsourcing among Icelandic SME service firms, from 2009 to 2018.Design/methodology/approachThe data presented in this paper cover responses from 802 small service firms, which were collected through telephone and online questionnaires. In order to have sufficient data on strategic outsourcing and to ensure a decent analysis, three surveys were combined.FindingsThe main finding of the present paper is that SMEs that have a developed strategy on outsourcing seem to perform better than those who do not have. The former are more likely to have achieved cost reduction, especially in housing and finance, and they use outsourcing to increase core businesses. They select vendor firms more on the bases of cost and services, rather than personal contacts. Also, these firms have improved service quality, by focusing on their core competences.Originality/valueTo the authors‘ knowledge, the present study is one of the few empirical studies that have examined outsourcing in SMEs from a strategic perspective. The findings are valuable for managerial practice and could be a base for outsourcing strategies in SMEs.

Bidding for outsourcing contracts with capacity investments and cost asymmetry

In this article, we consider a service supply chain where two vendor firms compete to win an information technology outsourcing contract from a client firm, which faces uncertain demand. The vendors’ variable operations costs are private information. The vendors also serve an external market with uncertain demand. After the award of the contract through bidding competition, vendors invest in capacity to meet their service requirements. We derive the optimal sourcing strategy for the client firm and the capacity investment decisions of the vendor firms. We characterise a threshold policy on the client’s outsourced requirements with respect to demand variability. We also observe that as the vendors’ mean cost increases, the requirements outsourced by the client firm decrease. In addition, we observe a threshold policy on the client’s outsourced requirements with respect to cost variability through numerical studies.

Resource co-specialization in outsourcing of enterprise systems software

Purpose Enterprise systems are commonly implemented by firms through outsourcing arrangements with software vendors. However, deriving benefits from these implementations has proved to be a challenge, and a great deal of variation has been observed in the extent of value generated for client and vendor firms. This research examines the role of co-specialization as a strategy to make the most out of outsourced enterprise systems. The authors develop hypotheses relating resource co-specialization with two indicators of success for implementation of enterprise software: (1) exchange success and (2) firm growth. Design/methodology/approach The hypotheses are tested using a unique panel data set of 175 firms adopting Advanced Planning and Scheduling (APS) software, a type of enterprise system used for managing manufacturing and logistics. The authors identify organizational factors that support co-specialization and then examine how co-specialization is associated with enterprise software implementation success, controlling for the endogenous choice to co-specialize. Findings The empirical results suggest that resource co-specialization is positively associated with implementation success and that the two resource co-specialization pathways that are examined complement each other in providing performance benefits. Originality/value This paper contributes to the research literature on outsourcing. The study also provides a new empirical test using a unique data set of 175 firms adopting APS Software.

Internal and vendor employees’ unethical behaviors in the supply chain: the case of India

PurposeThe purpose of this paper is to examine the impact of a corporate ethical policy, such as a code of ethics, on the unethical behavior of internal and vendor employees in the supply chain in India. It also aims to find whether International Standards Organization (ISO) certification of vendors affects the result and any significant relationship between management commitment and unethical behavior can be supported by the findings as well.Design/methodology/approachEmpirical analyses were conducted on a survey consisting of 43 questions comprising 181 valid responses. Multiple regression analysis that includes four independent variables – code of ethics, management commitment, supply chain principles and personal values taking unethical behavior as dependent variable – was used to find the significance of the relationship.FindingsThe implementation of a code of ethics, management commitment, supply chain principles and personal values all have a negative association with unethical behavior. Personal values, measuring a firm’s financial aspects for non-compliance to ethical behavior, have a positive association with unethical behavior. The relationships of top management commitment, personal values with internal employees’ unethical behavior are significant. The significant relationship between management commitment and unethical behavior can be supported by the findings as well. It was also found that ISO certificates and firm size as the control variables did not have any effect on the relationship between the independent variables and unethical behavior. The analysis also shows that ISO 26000 certificate, the international standard for socially responsible operations, does not impact this relationship.Research limitations/implicationsMeasuring substantial managerial effort for corporate social responsibility (CSR) practices by asking questions like, “how committed employees think top management is to social responsibility,” may not fully measure substantial managerial effort for CSR practices. To improve the results of the current study, future research can use the CSR index or disclosure as a measure to better reflect management commitment and practice for social responsibility. Second, the current study is limited to measuring how many occurrences of unethical behavior are witnessed by employees instead of what specific unethical behavior is more often witnessed. Considering India has the second largest population in the world, 181 responses may not represent the true practices in the business environment in India for generalization.Practical implicationsThe findings suggest that management should put more of an emphasis on improving the commitment of upper-level managers to decrease the overall unethical practices of their employees. The study finds that employees’ personal values influence their ethical behavior. Therefore, communications and training of employees at all levels should emphasis on improving personal values.Social implicationsBusinesses should influence academics to incorporate personal value building in course curricula. The Indian CSR law should incorporate the holistic view of CSR taking care of needs of all stakeholders under the provision of the regulation. In 2015, India became the first country in the world to legislate CSR practices in corporations but it misses the opportunity to sensitize the management and employees on ethical practices as it mainly identified philanthropic expenses as mandatory CSR spending and silent on ethical business practices.Originality/valueThe present study contributes to the literature by bringing supply chain context to the effect of different factors on unethical behaviors and interaction of internal and vendor firms in terms of ethical practices. There are several studies on business ethics in different countries including China, but in the case of India similar studies are not much. The present study fills the gap.

Task Interdependence and Firm Performance in Outsourced Service Operations

We conceptualize task interdependence between firms in outsourced service operations as an endogenous design choice made by the outsourcing firm. Then, utilizing relative firm efficiency and Tobin’s q as performance metrics, we examine the impacts of the task interdependence choices of outsourcing firms on their performances. We examine data, collected from a variety of sources, on 184 service alliances across nine industries. We find that task interdependence in outsourced service operations increases with the knowledge dependence of outsourcing firms on their vendor firms and with other contract-related factors, such as alliance duration, transaction complexity, and repeat relationships. Results indicate that outsourcing firms face challenges in choosing the appropriate levels of task interdependence in their outsourced service operations, and that excessive levels of task interdependence in outsourced service operations negatively affect the performances of outsourcing firms, both in terms of relative firm efficiency and long-term market value measures. Based on these results, we infer that firms need to invest in modularity-enhancing service architectures that reduce task interdependences with vendors before outsourcing large-scale, knowledge-intense service operations. The study contributes to the understanding of factors that influence the performances of outsourcing firms, and provides guidelines for organizing outsourced service operations.

How vendor capabilities impact IT outsourcing performance

PurposeThe purpose of this paper is to explore the underlying mechanisms through which integration capability and learning capability influence IT outsourcing performance from vendor’s perspective.Design/methodology/approachThis paper develops a moderated mediation model to explain the underlying influence processes of integration capability and learning capability on vendor’s performance. A sample of 237 vendor firms was obtained from China through two separated surveys. The hypotheses were tested with the partial least squares method and bias-corrected bootstrapping method.FindingsThe empirical results indicate that external integration capability (EIC) mediates the effect of internal integration capability (IIC) on vendor outsourcing performance, and the relationship between EIC and vendor performance is positively moderated by learning capability, while learning capability has a negative moderating effect on the link between IIC and vendor performance. Further, the conditional indirect effect is suggested. The indirect effect of IIC on vendor performance through EIC becomes non-significant when learning capability is low.Originality/valueThis study highlights the counterintuitive notion that learning capability may not always have uniformly positive effects and figure out the mechanism through which integration capability and learning capability can effectively improve IT outsourcing performance.

Corporate Quasi-Strategic Alliance via Outsourcing Transactions

This paper relates outsourcing parties together and tests whether the outsourcing contracts have any impact on the relationship of the two parties’ performance. Both the ex-anti and the ex-post changes in stock and accounting related performance of the contract signatories are examined. We find that after the contract effective year, there is statistically significant cross-autocorrelation between client and vendor firms’ stock returns. What’s more, on average daily returns of the client stocks lead those of the vendor stocks. We also find that accounting performance changes between the two parties show significantly higher level of cross-correlation than pre-event. Our finding of an increase in cross-autocorrelation between the ex-post performance of client and vendor firms indicates that corporate outsourcing transactions result in a quasi-strategic alliance.

A view from the vendor’s side: factors that determine satisfaction

PurposeWith the growth in outsourcing it is imperative to understand the vendor’s satisfaction with IT outsourcing relationships since contractual and relationship factors affect the ability of vendors and clients to work together over time. A recent study demonstrated that relational factors such as trust and information exchange dominated in their ability to explain client satisfaction when compared to contractual factors. The purpose of this paper is to further examine how the relational factors work together to lead to vendor satisfaction in an outsourcing relationship.Design/methodology/approachA survey was developed and pre-tested with vendors in India and client firms in the USA that used international IT vendors. Using data collected from 214 vendor firms in the Indian subcontinent the paper examines the main effect of two client focused variables, namely, competence-based trust and client dependence on vendor satisfaction; it also explores whether social control moderate the main effect relationships.FindingsThe findings indicate that client dependence and competence-based trust were significant direct predictors of vendor satisfaction. Social control or the ability to resolve conflicts positively moderated the effect client dependence on vendor satisfaction. But it did not impact the effect of competence-based trust on vendor satisfaction.Research limitations/implicationsThe authors identify three limitations: a dyadic analysis using both the client and the vendor perspective would have provided a richer understanding of the relationship; since the data were collected on a cross-sectional basis, it is hard to make predictive assessments; and a limited response rate.Practical implicationsThese findings help us understand the factors that impact vendor satisfaction in an outsourcing relationship and this is one of the keys to maintaining a long-term relationship between transacting parties.Originality/valuePrevious studies have explored the relational aspects of a vendor-client interaction from the client’s point of view and, here, the authors take the vendor’s perspective, which is increasingly important due to the increasing complexity of work outsourced. Besides exploring the direct effect competence-based trust and client dependence on vendor satisfaction, the authors also analyze the role of social control as a moderator.

Client dependence and vendor innovation: The moderating role of organizational culture

With the dramatic increase in technological interconnectedness between firms and the overall speed of technological change, organizations depend on each other to survive and stay competitive. While it is generally believed that dyads and networks can offer advantages over internal development in the innovation process, the authors suggest that it is not necessarily the case. Using a sample of 120 vendor firms that work in information technology industries in the Indian subcontinent, they find that client dependence in the inter-organizational relationship decreases vendor innovation. To resolve this dark side of business relationships, they further examine how the organizational culture can impact the dependence-innovation relationship. In line with organization literature, the authors distinguish two sub-dimensions of outcome-oriented culture: performance orientation, which reflects a firm's internal focus on employee performance, and competitiveness, which reflects a firm's focus on external competitors and markets. It is found that a vendor's competitiveness facilitates innovation, and that it weakens the negative effect of client dependence on vendor innovation. However, performance orientation strengthens the negative effect of client dependence on vendor innovation. Accordingly, in order to prevent themselves from falling into the dependence trap in the innovation process, firms need to build an externally oriented competitive culture and avoid overemphasizing their internal performance.