How Do Technology Paradigms Influence Configurations of Contract Characteristics for Success of Inter‐Organizational Outsourcing Projects, 1991–2009?

Abstract

What are the distinct configurations of contract characteristics associated with the success of inter‐organizational outsourcing projects across different technology paradigms? We examine information technology outsourcing contracts between 1991 and 2009 to address this question by using a relatively new approach based on qualitative comparative analysis. We consider four technology paradigms: pre‐Internet (1991–1996), pre‐Dotcom (1997–2000), post‐Dotcom (2001–2005), and Cloud Computing (2006–2009). We discuss issues related to adverse selection and moral hazard and identify five key contract characteristics that determine contract success: new contract, existing organizational relationship, long contract duration, fixed price, and competitive bidding. Our analyses document two key findings. First, we show that configurations of contract characteristics for success and failure of outsourcing projects are different across technology paradigms. Second, we identify three themes in configurations associated with outsourcing success—economic imperative, conservative relational, and conservative imperative. These themes extend prior work that draws on transaction cost economics, social exchange theory, and relational exchange theory and identify an increasing emphasis on the relational component to manage contracting risk for outsourcing success over time. From a managerial perspective, we provide context‐sensitive causal recipes to choose configurations of contract characteristics, considering technology paradigms. Together, our findings provide new insights for developing cumulative knowledge for understanding the determinants of success of interorganizational outsourcing projects while opening new avenues for further theorizing and empirical testing.