Exploring the effect of internal and external integration on the performance of professional service outsourcing

Abstract

Purpose This paper aims to investigate how the professional service outsourcing (PSO) firm’s external knowledge integration with global clients, internal integration across various functional units and the synergistic effects between them in improving PSO performance. Design/methodology/approach Drawing on the theory of organizational learning, a conceptual framework is proposed with hypothesized relationships. The relationships in this conceptual model were tested using a structural equation model (SEM) to analyze a survey dataset including 192 Indian-based professional service providers. Findings A service provider’s performance is positively associated with its external integration with global clients and internal integration across various functional units. Synergistic effect is generated from balanced high-level external and internal integration in improving PSO performance. Research limitations/implications This study contributes to the much-needed efforts in studying PSO, a new and fast-growing cross-border professional service activity, and provides helpful managerial implications to practicing global clients and offshore PSO service providers on how to successfully manage and govern the outsourcing process to achieve expected benefits. Originality/value This study focuses on offshore service provider’s viewpoint to extend traditional supply-chain integration regarding cooperative and mutually beneficial mechanisms to the context of PSO.