Impacts of information technology (IT) outsourcing on organizational performance: A firm-level empirical analysis

Abstract

We investigate the impact of Information Technology (IT) outsourcing on firm performance from several dimensions, including changes in labor productivity, improvements in financial and operational performance variables, and stock market valuation of IT outsourcing initiatives as measured by Tobin’s q. While our main objective is to better understand the economics of IT outsourcing, we also aim to contribute to the literature on the business value of IT in general. Our research contributes to the relevant literature from the following perspectives: (i) the change in the performance levels of firms due to IT outsourcing is measured against that of firms not outsourcing at all, (ii) panel data regression model is utilized in order to capture both cross-sectional and time-series differences among firms, (iii) the diversity of IT outsourcing initiatives is explicitly considered in the model, and (iv) a comprehensive data set covering the period between 1984 and 2007 is used.

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