The Effects of Capabilities and Governance on Information Technology
and Business Process Outsourcing Performance: Client and Provider Perspectives
Commitment is defined as the degree to which clients and providers pledge to sustain a
relationship (e.g., Lee and Kim 1999; Lacity et al. 2010). In outsourcing research, both contractual commitment and relationship commitment have been discussed (e.g., Lee and Kim 1999; Lee and Kim 2005). Contractual commitment for clients implies trying to pay the service fee and offering the support as contractually agreed (Kern and Willcocks 2002). Conversely for providers, contractual commitment means achieving contractually stipulated goals (Kern and Willcocks 2002).
Relationship commitment encourages clients and providers to make specific investment in a relationship, to resist attractive short-term substitutes, and to view potentially high-risk activities as being acceptable due to the belief that the other party will not carry out opportunistic actions (Lee and Kim 2005).
They evolve as the participating actors mutually and
sequentially demonstrate their trustworthiness and carry out activities toward one another. Therefore, given the dynamic nature of inter-organizational exchange, relational governance which promotes mutual trust and effective communication is critical to outsourcing performance. Many prior studies have demonstrated that relational governance improves the outsourcing performance
(e.g., Poppo and Zenger 2002; Sabherwal 1999).For example, Poppo and Zenger (2002) find that relational governance which matches transaction attributes is significantly and positively associated with better outsourcing performance. Sabherwal (1999) discusses the role of trust in outsourcing projects and finds that trust along with appropriate controls can generate good quality and timely progress.
Relational governance refers to governance an outsourcing arrangement through social
processes that advance norm of trust, reciprocity, flexibility, mutual understanding and so on (Goo et al. 2009; Poppo and Zenger 2002). A rich body of empirical studies, as summarized in Table 6, have investigated the impacts of relational governance factors on outsourcing performance (e.g., Kern and Willcocks 2002; Kim and Chung 2003; Klepper 1995; Lacity et al. 2004; Rottman and Lacity 2008; Sabherwal 1999; Rai et al. 2012). In general, relational governance has shown to improve outsourcing performance.