The Role of Vendor Legitimacy in IT Outsourcing Performance: Theory and Evidence

Author:

Hsu Carol1ORCID,Lee Jae-Nam2ORCID,Fang Yulin3ORCID,Straub Detmar W.4ORCID,Su Ning5ORCID,Ryu Hyun-Sun6

Affiliation:

1. University of Sydney, Sydney, New South Wales 2006, Australia

2. Korea University Business School, Seoul 136-701, Korea

3. Faculty of Business and Economics, The University of Hong Kong, Hong Kong SAR, China

4. Temple University, Hayesville, North Carolina 28904;

5. Ivey Business School, Western University, London, Ontario N6G 0N1, Canada;

6. Institute for Artificial Intelligence and Software, SoonChunHyang University, Asan-si 31538, Korea

Abstract

Information technology outsourcing (ITO) relationships today are facing increasingly turbulent environments. This research examines ITO performance by focusing on client firms’ perceived legitimacy of vendors, termed “vendor legitimacy,” consisting of pragmatic, cognitive, and moral dimensions. Based on our surveys with executives and managers at 200 ITO client firms, the study’s findings present the imperative to actively manage vendor legitimacy for achieving and sustaining ITO performance. Specifically, at the strategic level, clients’ perception of vendors as mutually aligned, long-term-oriented, tightly integrated partners is critical. At the operational level, clients should collaborate with vendors to design and establish interorganizational routines that undergird vendor legitimacy. At the managerial level, clients’ relational governance plays a pivotal role in attaining procedural justice, ethical standards, and fairness in the interorganizational collaboration. In sum, our study suggests that creating a dedicated corporate function or unit for continually overseeing and assessing a portfolio of vendors and swiftly identifying and responding to potential issues and crises related to vendor legitimacy would be a worthwhile investment.

Publisher

Institute for Operations Research and the Management Sciences (INFORMS)

Subject

Library and Information Sciences,Information Systems and Management,Computer Networks and Communications,Information Systems,Management Information Systems

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