IS Outsourcing Governance in Innovation-Focused Relationships: An Empirical Investigation

Out of the various motivations and intentions for outsourcing information technology, customers’ expectations of innovative IT products and services for business advantage have only recently become an emerging issue among IT service providers and their customers. But little is known about ITenabled innovation in IS outsourcing settings and how to manage such outsourcing relationships. Do customers who strive for innovation through outsourcing have other governance mechanisms in place than customers who do not expect innovation potentials from their outsourcing vendor? Based on 268 responses from chief information officers and IT executives, this paper shows that innovation-seeking customers manage their outsourcing relationship differently from those who do not associate innovation opportunities with their outsourcing relationship. In innovation-seeking outsourcing settings informal relationship mechanisms have a significantly stronger impact than in non-innovation seeking settings. However, contractual governance was found to be important regardless of the outsourcing intent. These findings call for further research on the relation and mutual impact of contractual and relational governance, e.g. by formalizing experience and mutual learning gathered through relational governance of the outsourcing partners in a contract.