Exploring Signaling Roles of Service Providers' Reputation and Competence in Influencing Perceptions of Service Quality and Outsourcing Intentions

Abstract

With the advancement of technology, the utilization of information technology/information systems (IT/IS) is increasingly important in enhancing productivity. Thus, IT/IS outsourcing has become a crucial issue for companies. When faced with an unfamiliar outsourcing service market, and particularly when initially outsourcing, client companies experience uncertainty. Employing the signaling theory, the study proposes one intrinsic cue (competence) and one extrinsic cue (reputation) for outsourcing service providers to evaluate service quality, value, and the subsequent outsourcing intentions of clients. The results demonstrate that suppliers' competence and reputation are influential signals for perceived service quality, which in turn affects perceived value and outsourcing intentions. Moreover, suppliers' reputations are found to have a greater impact on perceived service quality than suppliers' competence; the latter has a direct effect on perceived value, while the former does not. The implications for theory and practice are also discussed, as are suggestions for future research.