Aligning Governance Mechanisms With Task Features to Improve Service Capabilities ── An Empirical Study of Professional Service Outsourcing in India

Abstract

As emerging markets increasingly play important roles in outsourcing, we focus on the complex relationships in the professional service outsourcing environment. Building on information processing and contingency theories, this paper contributes to the much-needed efforts in the study of professional service outsourcing, a new and fast-growing cross-border professional service activity. This study examines the impact of task characteristics and their alignment with inter-firm governance mechanisms in improving service capabilities. Using survey data from 192 Indian professional service providers, we find the relationship between task complexity and service capabilities to be curvilinear in nature. More importantly, contractual governance mechanism works better in dealing with the uncertainties associated with task complexity and connectivity, while administrative governance mechanism does a better job in dealing with the problem of task security. Contractual and administrative mechanisms complement each other in dealing with tasks with high complexity and security issues. Managerial implications are drawn for practicing global clients and offshore service providers regarding how to successfully manage and govern the outsourced professional tasks to achieve expected benefits.