Abstract
There is growing evidence that client firms expect outsourcing suppliers to transform their business. Most outsourcing vendors indeed deliver incremental innovation to client firms. However, radical innovation in outsourcing is more challenging to achieve. While prior studies have provided some evidence regarding how innovation in outsourcing may take place, research has so far failed to conceptualize and operationalize the factors affecting radical innovation in outsourcing. It is not yet clear how contractual and relational aspects affect such innovation. This paper, therefore, is set about exploring the effect of contract types and client-supplier relationship on radical innovation. Results suggest that joint-venture contract and strong client-supplier relationship lead to radical innovation while time and materials and fixed-price contracts are less likely to lead to radical innovation. The strength of client-supplier relationship mediates the effect of joint venture contract on radical innovation. The paper concludes by discussing the theoretical and practical implications.
Recommended Citation
Oshri, Ilan; Kotlarsky, Julia; and Gerbasi, Alexandra, "Can Client Firms Achieve Radical Innovation in IT Outsourcing?" (2011). ICIS 2011 Proceedings. 4.
https://aisel.aisnet.org/icis2011/proceedings/projmanagement/4
Can Client Firms Achieve Radical Innovation in IT Outsourcing?
There is growing evidence that client firms expect outsourcing suppliers to transform their business. Most outsourcing vendors indeed deliver incremental innovation to client firms. However, radical innovation in outsourcing is more challenging to achieve. While prior studies have provided some evidence regarding how innovation in outsourcing may take place, research has so far failed to conceptualize and operationalize the factors affecting radical innovation in outsourcing. It is not yet clear how contractual and relational aspects affect such innovation. This paper, therefore, is set about exploring the effect of contract types and client-supplier relationship on radical innovation. Results suggest that joint-venture contract and strong client-supplier relationship lead to radical innovation while time and materials and fixed-price contracts are less likely to lead to radical innovation. The strength of client-supplier relationship mediates the effect of joint venture contract on radical innovation. The paper concludes by discussing the theoretical and practical implications.