Global outsourcing relationships: Testing the effects of culture and market pressures on outsourcing performance

In this dissertation, two competing perspectives are developed and tested focusing on the influence of culture versus market pressures on the performance of global outsourcing relationships. First, the cultural argument differentiates the concept of power distance into individual and societal foci. The congruence between these levels and adherence to local cultural values are argued to impact the performance of the outsourcing venture. Conversely, the market perspective contends that the performance of outsourcing projects is determined by the fit between managerial cognition and the task environment. The cognitive construct considered in this dissertation is market orientation. Alignment between employee market orientation and the project task environment is argued to influence outsourcing performance. In addition, incompatibility between culture and market pressures is considered. Individual and project characteristics that affect outsourcing performance are further examined, specifically turnover, trust, and role conflict. The arguments presented in this dissertation draw up and contribute to theories on culture, cognition and inter-organizational relationships. To test these arguments, interview and questionnaire survey data are collected from twenty-six global outsourcing projects in a single information technology organization. Projects spanning the emerging economies of India, China, and Mexico as well as developed nations in North America and Europe are studied. A total of 1347 employees and 18 countries are represented in the sample. Results support the distinction of societal and interpersonal power distance, and their differential pattern of relationships. Additionally, the discriminant validity of cognitive and behavioral market orientation is supported. Cognitive market orientation is positively, while components of the task environment negatively, related to project performance, as expected. Furthermore, empirical evidence of incongruence between culture and market pressures is supported by the negative relationship between cognitive market orientation and interpersonal power distance. Additionally, turnover, trust and role conflict are found to influence performance. Exploratory analyses reveal the moderating role of project risk on the relationships between performance and role conflict, coworker trust and team communication. Role conflict is positively related to project performance in low risk projects. Moderator analyses further demonstrate that coworker trust and team communication increase performance in only high risk projects. Implications of these findings to research on culture, cognition and global outsourcing are discussed below.