Opportunism and the dynamics of strategic outsourcing relationships

Abstract

Purpose This study aims to investigate the effect of power and dependence as separate constructs on opportunism. Power-dependence studies have been previously used to explain opportunistic behavior in strategic outsourcing relationships. However, there have been no clear distinctions about the separate effects of each regardless of the different theoretical dispositions each construct uses with respect to the dynamics of strategic outsourcing. Design/methodology/approach This study used multiple theoretical perspectives to analyze the courses of six dyadic strategic outsourcing relationships from the pharmaceutical industry in Egypt. The study employed an exploratory research approach to retrospectively examine the development of dependency and power-balance variables throughout the pre- and post-contractual phases. Findings The paper concludes with a time-phased theoretical framework and a set of propositions that further segment the post-contractual relationship phase. The segmentation allows for better studying the outsourcing phenomenon and differentiates between having power, recognizing power and exercising power. Research limitations/implications The paper theorizes that buffering against opportunism requires a certain state of power-balance awareness, as power was found to be dynamic, relative and arguably “perceptual”. This awareness would not be needed if the outsourcing relationship was static, but given the time argument in this study, awareness of the power-balance shifts becomes necessary in managing strategic outsourcing relations. Practical implications The comprehensive framework represents a guiding tool for managers who are planning to, or are currently involved in, strategic outsourcing relationships. Originality/value This study applied a time dimension to studying opportunism in strategic outsourcing relationships, and used this perspective to examine the length of the period of mutual dependency and power-balance between buyers and suppliers. The notions of power-balance awareness and latent sources of power are introduced.