Determinants of contract completeness for information technology outsourcing

Benoit A. Aubert (), Jean Francois Houde, Suzanne Rivard and Michel Patry
Additional contact information
Benoit A. Aubert: Victoria University of Wellington
Jean Francois Houde: University of Pennsylvania
Suzanne Rivard: HEC Montreal
Michel Patry: HEC Montreal

Information Technology and Management, 2017, vol. 18, issue 4, No 3, 277-292

Abstract: Abstract This study developed and tested a model of the determinants of completeness of IT outsourcing contracts. The model is based on the assumption that the level of contract completeness results from a trade-off between the cost of developing a complete contract and the protection it offers. In contrast with outsourcing in many other sectors, IT outsourcing can be a temporary measure, with the anticipation that activities can be reintegrated in-house. This means that managers have to take into account the time horizon when deciding on the level of completeness of the contract. Results show that firms rely on more complete contracts when outsourcing is seen as a permanent approach. Also, transaction cost theory variables play multiple roles. Uncertainty reduces the level of completeness, while idiosyncrasy reduces partly the use of permanent outsourcing. Demand predictability, representing frequency, plays a dual role, increasing completeness but reducing the likelihood that outsourcing is used as a permanent solution.

Keywords: Outsourcing; Contract; IT characteristics; Contract design (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10799-016-0265-5

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