Subrata Chakrabarty

The strategic choice to continue outsourcing, switch vendors, or backsource: Do switching costs matter?

IT outsourcing contracts are often discontinued in favor of other alternatives (returning to in-house development, or switching to another vendor). Switching costs are experienced when terminating a business relationship and securing an alternative. We tried to answer the question: do switching costs matter significantly in the strategic choice to continue outsourcing, switch vendors, or backsource? Switching costs were considered, such as those due to IT operations (sunk investment, lost performance, system upgrades, uncertainty, and induction-retraining-performance), personnel-replacement costs (candidate search, and IT/setup), and in-house learning (cognitive/behavioral learning). A field survey was conducted, and, for each of these cost types, the differences between group means across the three groups (outsourcing continuation, vendor switching, and backsourcing) were determined. The findings suggested that customer organizations preferred outsourcing continuation most and backsourcing least when their switching costs were high. However, the relative preference for vendor switching depended on the switching cost type.

The Sidelining of Top IT Executives in the Governance of Outsourcing: Antecedents, Power Struggles, and Consequences

This study attempts to highlight the paradoxical aspects of top management power contests within customer firms that outsource information technology (IT) work. Intraorganizational power theory forms the overarching theoretical basis for this study. The focus is on the antecedents and consequences of the relative power of business executives (Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer) versus IT executives (Chief Information Officer, Head of IT) in the governance of IT outsourcing. Evidence from a field survey supports the existence of a paradox. When a firms financial performance has been poor and the firm did not have a sizeable IT workforce, the business executives give themselves greater power and sideline the IT executives. Paradoxically, rather than leading to positive consequences, such power play weakens outsourcing performance. Outsourcing performance is best when power is solely with the IT executives group, a close second best when power is divided between the two groups (joint decision making), and worst when it is solely with the business executives group. Overall, when it comes to the outsourcing of IT work, business executives might find reasons to justify increasing their own power and reducing the power of IT executives, even though this can ultimately be detrimental to outsourcing performance. These findings lend credence to case studies and practitioner articles that have reported such occurrences.

Corporate governance in microfinance institutions: Board composition and the ability to face institutional voids

Manuscript Type. Empirical. Research Question/Issue. We utilize institutional theory to examine corporate governance in microfinance institutions (MFIs). Many MFIs operate at the bottom of the economic pyramid (BOP), which is usually agrarian, impoverished, and plagued with institutional voids. We investigate the link between the composition of the boards of MFIs and the ability of the MFIs to face institutional voids to ensure organizational viability. Research Findings/Insights. We find that MFIs with boards that have more socio‐economic expertise and female representation are better able to lower the MFIs costs of operating at the BOP. However, this relationship weakens when the effectiveness of agrarian institutions at the BOP is low. When agrarian institutions are ineffective, the board of the MFI may have difficulty in helping the MFI reduce its costs of operating at the BOP. Agrarian crises arising from ineffective agrarian institutions tend to aggravate the various institutional voids present at the BOP, making it harder for the board to guide the MFI around the institutional voids. Theoretical/Academic Implications. We extend institutional theory to understand how boards direct and control firms operating at the BOP to face institutional voids. In some cases, a firm can fill an institutional void. However, because other institutional voids exist, the board must also help the firm develop workarounds to ensure organizational viability. We extend existing literature on board composition to highlight how human capital and gender diversity of boards can help improve the viability of firms operating at the BOP. Practitioner/Policy Implications. MFIs with high operating costs may benefit from electing a board with socio‐economic expertise and female representatives. Governments and policy makers can work toward building effective social, economic, and political institutions to help create contexts that are favorable to firms (such as MFIs) that often find it difficult to operate at the BOP.

Power Politics in the Governance of IT Outsourcing: The Undermining of Top IT Executives

IT labor is cheaper in countries like India and China than in the advanced economies like USA. When a US firm’s performance has been poor, its business leaders (CEO, CFO, COO) may attempt to undermine its IT leaders (CIO, Head of IT, etc.) to exercise power over the outsourcing of IT work. IT leaders may resist such attempts if they have the support of a sizeable in-house IT workforce—who might be incited by their cultural differences against the supplier’s IT workforce. Ultimately, a consequence of business leaders undermining IT leaders is that the customer firm’s outsourcing performance could suffer.