Modeling the Knowledge Factors that Explain Onshore Information Systems Development Outsourcing Success in Ethiopia: a Client-Vendor Dyad
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Date
2021-07
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Addis Ababa University
Abstract
Despite the increased organizational spending on Information Systems Development Outsourcing (ISDO), ensuring ISDO success and delivering business values from such initiative remains a challenge for business managers in a developing economy. In recent studies, there has been much interest in addressing the challenge from the antecedents and consequences of knowledge exchange between clients and vendors. However, a review of the literature on knowledge transfer and ISDO shows that most of the studies are (a) dominated by a one directional knowledge transfer from or to one of the outsourcing parties; (b) focused on examining ISDO success from either the clients' or vendors' perspective, but not both; (c) focused on offshore ISDO context of developed economies. Although these earlier studies are useful, the direct transferability of the findings to the context of developing economy countries such as Ethiopia is questionable. This is because ISDO arrangements in a developing economy are characterized by an immature ISDO market. Client organizations lack experience in how to govern outsourced IS/IT initiatives and outsourcing partners usually demonstrate a lower level of awareness about the value of knowledge due to unsupportive knowledge transfer culture.
Therefore, research that investigates mutual ISDO success by addressing the limitations of prior research and capturing the significant context of developing economy through the lens of sound knowledge-related theories is needed. Thus, this study is set out to address the following research questions: (a) what are the key knowledge-related factors influencing onshore ISDO success? (b) how are these factors interrelated? and (c) to what extent do these factors contribute to onshore ISDO success?
A review of the literature on ISDO, knowledge exchange, and ISDO success was conducted. Based on the findings from the literature, an exploratory study, and drawing from knowledge based view and social exchange theories, a knowledge-based onshore ISDO success conceptual framework was developed from the client-vendor perspective.
This study was informed and guided by the positivist research paradigm. A mixed-methods research strategy particularly a sequential transformative mixed method was employed. The findings from the qualitative and exploratory study in Phase 1 were used as inputs in the development of the quantitative study in the second phase. Semi-structured interviews (10 project managers) and survey techniques were used to collect data in phases 1 and 2 respectively from the onshore ISDO practices in Ethiopia. SmartPLS 2.0 M3 statistical tool was used to analyze the survey data, assess the reliability and validity of the measurement model, and test the hypothesized relationships in the proposed conceptual model.
The findings of the research show that onshore ISDO partners in a developing economy can deliver projects on time, increase their satisfaction with one another, and with the shared benefit and nurture long term partnership by (a) enhancing the utilization of knowledge transferred between vendors and clients; (b) developing their absorptive capacity, and (c) improving the effectiveness of knowledge exchange. To do so, the development of mutual disseminative capacity, mutual absorptive capacity, mutual learning intent, and mutual competence trust between clients and vendors play a significant role and in turn, indirectly contribute to ISDO success. Furthermore, the results of the study indicate that knowledge transfer and absorptive capacity contribute to knowledge utilization in onshore ISDO relationships. The findings also show that knowledge utilization partially mediates the relationships between knowledge transfer and ISDO success and mutual absorptive capacity and ISDO success. The study's results further suggest that mutual disseminative capacity, mutual absorptive capacity, and mutual learning intent facilitate knowledge transfer. Lastly, the results also confirm that in a bi-directional flow of knowledge, knowledge recipients’ absorptive capacity necessitates mutual disseminative capacity, mutual learning intent, and mutual competence trust of outsourcing partners.
The research makes several contributions to ISDO research and practice. The overall findings indicate that taking the client-vendor dyads, instead of either a client or vendor perspective, offers a more complete picture of the knowledge dynamics that influence ISDO success. In terms of theory, the study contributes an onshore ISDO success framework to the ISDO literature in a developing economy. The utility of this framework is demonstrated as the research model explains 53.5% of the variance in onshore ISDO success. In addition, the study contributes sufficiently contextualized and research-ready instruments to operationalize constructs such as mutual knowledge dissemination, mutual absorptive capacity, mutual learning intent, mutual competence trust, knowledge transfer, and utilization. Together, the framework and instrument may encourage future research.
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Development Outsourcing Success, Information Systems Development Outsourcing, Onshore Information Systems Development