Professional services, such as accounting, finance, engineering and management
consulting, are significant contributors to the U.S. economy accounting for the largest
value added industry within the private sector. Knowledge-intensive professional
services reached this level of economic prominence by responding to heightened
competition, managing rising costs, utilizing key resources, and re-directing their focus to internal core competencies through the strategic decision to engage in offshore
outsourcing relationships. By 2015, the Congressional Research Study report predicts 3.4
million, or 13.7% of professional service jobs will be offshore outsourced. Offshore
outsourcing is a firm level strategic decision to relocate business activities to an offshore
third party primarily to emerging markets. Based on existing theories of transaction cost economics, resource based view, and resource dependence theory, this dissertation
empirically validates a comprehensive model evaluating the multi-dimensional relational
governance mechanism of collaboration on the capabilities of the offshore service
provider
In addition, the model examines the influence of the service capabilities on the
success of the client firm. One of the key contributions of this study is the client
perspective examination of the relationship between the U.S. client firm and offshore
service provider thereby addressing a stated need for additional academic research.
The importance of governance mechanisms established by professional service
firms have evolved over time from minimizing transaction costs and opportunistic
vii
behavior, to maximizing access to complementary resources, to building long-term
relationships based on communication, commitment and information sharing. These
governance mechanisms are integral to a collaborative client-vendor relationship. This
dissertation develops hypotheses, from existing outsourcing literature, evaluating the
influence of collaboration on the client’s perception of the learning capability, the service
innovativeness and the technological capability of the offshore service provider.
Additional hypotheses include the influence of these three capabilities on the success of the client firm. Measurement scales were adopted from prior research, tested for
reliability and validity using exploratory factor analysis, and used in structural equation modeling to assess the hypotheses. The analyzed results confirm the significant influence of collaboration on service firm capabilities and the influence of capabilities on the success of the offshore outsourcing engagement.