The Impacts of Network Governance on the Performance of ITO: A Study of Taiwanese Firms

The Impacts of Network Governance on the Performance of ITO: A Study of Taiwanese Firms

Tzu-Chaun Chou (Department of Information Management, National Taiwan University of Science and Technology, Taipei City, Taiwan), Shu-Mei Hsu (Department of Information Management, National Taiwan University of Science and Technology, Taipei City, Taiwan) and Gwo-Guang Lee (Department of Information Management, National Taiwan University of Science and Technology, Taipei City, Taiwan)
Copyright: © 2013 |Pages: 21
DOI: 10.4018/jgim.2013100104
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Information technology outsourcing (ITO) has been a spotlight issue for global enterprises and previous studies have suggested that ITO research has expanded from one organization and bilateral partnerships to a global form of network organization. Yet, little research has been conducted on the link between network governance and ITO performance as a way to understand an organization’s ITO efforts. This study proposes a model that employs several constructs: inter-organizational coordination, contractual governance and relational governance, and technological hegemony. The model explores the mediating roles of these governance mechanisms and the moderating role of technological hegemony as it influences the IT manager’s perception of the performance of ITO. Empirical testing of the model is based on a sample of 191 companies from Taiwanese industries. The results support the mediating effect of relational governance and the moderating effect of technological hegemony. The model and results offer a perspective on managing the performance of ITO as well as initial insight into the role of technological hegemony.
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1. Introduction

World’s economic activity become increasingly globalize operation, among them, IT outsourcing activity is the epitome of globalized divided work. Information technology outsourcing (ITO) refers to transferring part or all of a firm’s Information Systems/Information Technology-related functions, business processes, internal activities, and services to an external provider (Chen & Wang 2009; Kern & Willcocks 2000). Addition, IT outsourcing embedded in personal social network, and this kind of personal social network cooperation between different culture would form a format of globalized network organization, it more emphasize the importance of managing network form cooperation, that is, network governance. Along with developing the concept of a network organization, these studies imply that understanding network governance of ITO is an important viewpoint when examining the performance of ITO. Yet, despite a growing body of research focusing on IT governance, previous studies have neglected the impact of network governance on ITO performance.

Lack of a thorough understanding of network governance is a drawback in pursuing improved ITO performance. On the one hand, in studying ITO, network governance not only serves to negotiate and harmonizing certain unequal situations and conflicts, but also enhances the quality of relationships and contracts and introduces more efficiency in governing contracts and relationships (Lin el al., 2011). On the other hand, the relationship between the outsourcer and the contractor can be seen as a double-edged sword: it can be treated as both a resource in facilitating ITO projects and as a burden in reducing the rationality of decision-makers (Chou et al., 2006).

A great deal of the research has examined the influence of partnership on ITO performance has ignored the role of organization autonomy in developing partnerships. The gap is especially notable because it may lead to an increase in the phenomena of technological hegemony, because the outsourcing relationship is sometimes operated under knowledge asymmetry and the commissioned contractor (the agent) has more professional technology than the outsourcer (the principal) (Goo et al., 2009; Tiwana & Bush, 2007). As a result, the outsourcer could be dominated by the superior techniques of the IT contractor because trust and dependence are embedded in the outsourcing partnership. Such technological hegemony can induce contractors to demand more resources from the outsourcer and leverage their strengths to force the outsourcer to accept unattractive governance features then make outsourcer lose autonomy unconsciously (Bosse &Alvarez, 2010; Bunderson & Reagans, 2011). Clearly, then, the phenomenon of technological hegemony is a crucial threat to outsourcing activities; thus, we should further investigate its influence in inter-organizational cooperation. Therefore, the objective of this study is to examine the links between the network governance, technological hegemony, and the performance of ITO empirically. Examining these underlying influences by integrating insights from the literature on network governance, technological hegemony, and ITO performance provides the primary motivation for the current study. Based on prior literature, the constructs and hypotheses are developed. Scales for these constructs are then validated empirically using data collected from a national survey of 191 companies from Taiwanese industries. A Partial Least Squares (PLS) method is used to test the reliability and validity of constructs and hypothesized relationships. The implications of the findings for effective ITO performance are discussed.

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