Abstract

A client and vendor in an information technology outsourcing (ITO) relationship experience various tensions as their relationship develops, which, if left unattended, may result in undesired ITO outcomes. This warrants them to be capable of managing the tensions. While prior ITO research has advanced knowledge on how either a client or a vendor can develop capabilities to manage specific tensions to realize efficiency or innovation outcomes, little attention has been given to an interfirm (client and vendor) perspective, which has implications for how an ITO relationship develops. This study draws on the dynamic capabilities literature and interview data to explore how ITO clients and their vendors can co-develop the capability to manage the tensions experienced in their relationships. We identify 11 processes through which such capabilities can develop, which we group into sensing, seizing, and transforming ITO relational tensions, and ITO contextual factors. We offer a framework that advances ITO research on tension management capability development from a firm to an interfirm perspective. Also, by uncovering how ITO client and vendor firms can co-develop dynamic capabilities to manage tensions in their relationship, we bridge the theoretical gap between existing ITO research on tension management capability development and developing dynamic capabilities.

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