Strategic Information Technology Partnerships in Outsourcing as a Distinctive Source of Information Technology Value: A Social Capital Perspective

Abstract

Firms increasingly acquire needed information technology (IT) products and services from external partners. In spite of the ubiquity of IT outsourcing in contemporary organizations, however, theoretical understanding of the dynamics of this phenomenon is limited. A dominant perspective used to explain IT outsourcing is transactions-cost economics (TCE) that focuses attention on efficiency and cost-reduction goals, and emphasizes opportunistic behavior. We suggest that by viewing outsourcing relationships as arms-length transactions, TCE may lead to overlooking potential mechanisms inherent in IT outsourcing relationships for the creation of alternative types of value. We present a relational lens for viewing the IT outsourcing phenomenon that is premised on knowledge exchange and learning. Specifically, we argue that the strategic partnership a firm forms through IT outsourcing constitutes a source of social capital for the focal firm, which facilitates (IT) collaboration between the focal firm and its partner. The learning resulting from knowledge exchange and transfer through the collaboration, in turn, generates (IT) value for the focal firm. Two manifestations of IT value are considered: strengthened internal IT partnerships, and IT-enabled innovation. We examine specific characteristics of social capital and how they influence the learning that occurs in the partnership. Propositions that can serve as the basis for future research are developed.

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