Intra-organizational information asymmetry in offshore ISD outsourcing



2014, vol. 44, n°1, pp.94-120

Departments: Information Systems and Operations Management, GREGHEC (CNRS)

Keywords: Offshore outsourcing, Agency theory, Information asymmetry, Information system development

Contemporary offshore Information System Development (ISD) outsourcing is becoming even more complex. Outsourcing partner has begun ‘re-outsourcing’ components of their projects to other outsourcing companies to minimize cost and gain efficiencies. This paper aims to explore intra-organizational Information Asymmetry of re-outsourced offshore ISD outsourcing projects.Design/methodology/approach - An online survey was conducted to get an overall view of Information Asymmetry between Principal and Agents (as per the Agency theory).Findings - Statistical analysis showed that there are significant differences between the Principal and Agent on clarity of requirements, common domain knowledge and communication effectiveness constructs, implying an unbalanced relationship between the parties. Moreover, our results showed that these three are significant measurement constructs of Information Asymmetry.Research limitations/implications - In our study we have only considered three main factors as common domain knowledge, clarity of requirements and communication effectiveness as three measurement constructs of Information Asymmetry. Therefore, researches are encouraged to test the proposed constructs further to increase its precision.Practical implications - Our analysis indicates significant differences in all three measurement constructs, implying the difficulties to ensure that the Agent is performing according to the requirements of the Principal. Using the Agency theory as theoretical view, this study sheds light on the best contract governing methods which minimize Information Asymmetry between the multiple partners within ISD outsourcing organizations.Originality/value - Currently, to the best of our knowledge, no study has undertaken research on Intra-organizational Information Asymmetry in re-outsourced offshore ISD outsourcing projects