Mediated power and outsourcing relationships

Mediated power is often used by firms to control the behaviors or influence the decisions of other members of the value chain. Interestingly, significant contributions in the academic literature offer consistent evidence that the use of mediated power has a negative impact on the quality of inter-organizational relationships. Yet, there is a dearth of empirical research investigating the conditions under which the use of mediated power is more or less prevalent. Utilizing dyadic data collected on 102 outsourcing relationships, this study evaluates how the buying firm's dependence on the service provider, asserted importance of the outsourced activity, and difficulties with other inter-organizational control mechanisms are related to their reliance on mediated power. Results from our hierarchical regression analysis support the hypotheses that the use of mediated power is diminished when the buyer is currently more dependent on the service provider due to switching difficulties and the buyer has a higher expectation of future supply market consolidation. Similar hypotheses regarding the effect of the strategic importance of the outsourced activity and entry barriers to the service provider's market were not supported. The results also support the hypothesis that the use of mediated power is more pronounced when the buyer experiences contract management difficulties, but the same is not true when the buyer has difficulty in monitoring the provider. To our knowledge, these findings represent the first empirical explanation of conditions which either attenuate or exacerbate the use of mediated power by outsourcing organizations.     

Outsourcing customer support: The role of provider customer focus

An increasing number of firms are outsourcing customer support to external service providers. This creates a triadic setting in which an outsourcing provider serves end customers on behalf of its clients. While outsourcing presents an opportunity to serve customers, service providers differ in their motivation and ability to fulfill customer needs. Prior research suggests that firms with a strong customer focus have an intrinsic motivation to address customer needs. We suggest that in an outsourcing context, this intrinsic motivation does not suffice. Using a Motivation–Opportunity–Ability framework, we posit that the effect of a provider's customer focus will be moderated by a set of relational, firm, and customer characteristics that affect its ability to serve end customers. We test our conceptualization among 171 outsourcing clients from the Netherlands and then validate these results among 135 Indian outsourcing providers. The findings reveal that customer-focused providers achieve higher levels of customer need fulfillment but this effect is contingent on their ability to serve end customers. In particular, customer-focused providers more effectively fulfill customer needs when clients and providers share close relational ties, when clients also have a high level of customer focus, and when end customer needs exhibit a low degree of turbulence. In addition, we find that, in turbulent markets, equipment-related services offer greater opportunity for effective customer need fulfillment than other outsourced services.     

Shareholder value implications of service failures in triads: The case of customer information security breaches

The rise in front-end service outsourcing in recent years, despite its advantages, has also exposed buyer firms to unique challenges. One of the most salient risks for buyer firms in service triads is service failure due to the service provider. Indeed such service failures may be more costly for firms due to the greater relational and operational costs that may arise from the presence of the third-party provider. Yet, neither the services literature nor extant operations literature on service triads has paid much attention to the financial consequences to the buyer firm – i.e., service risks – of such service failures in triads. To fill this gap, we investigate the financial penalty of service failures due to the service provider using the event study methodology and a sample of 146 customer information security breaches as our empirical context. Analysis of the abnormal returns reveals that service failures due to the front-end service provider lead to greater shareholder losses than such failures due to the buyer firm. This provides important new insight into the financial risks arising from outsourcing front-end services. Further, we investigate the ability of the buyer firm's employee and financial resources to temper these shareholder losses. We find that buyer firm employee productivity can moderate the greater financial penalty associated with such triadic service failures but that buyer firm leverage tends to not have such a mitigating effect. This provides new guidance for theory and practice regarding how buyer firms can position themselves to buffer the financial risks arising from service failures due to front-end service providers.     

The influence of exchange hazards and power on opportunism in outsourcing relationships

Service provider opportunism is widely noted as a principal risk with outsourcing. Indeed, economic theory regarding the factors which influence the outsourcing decision, treats opportunism as a core behavioral assumption. It is assumed that if given the opportunity, outsourcing providers will act in a self-serving manner despite the potentially negative impact it may have on their customer. Other researchers have suggested that opportunism is not an unwavering human behavior, but rather can be substantively influenced by the management practices which define the relationship. Building on these arguments, this study investigates the validity of these divergent positions. Hierarchical linear regression is used to examine dyadic data on 102 information technology, logistics, and other business process outsourcing relationships. We test a model which hypothesizes that the buying firm's reliance on different bases of inter-firm power will have differing effects on the risk of opportunism (shirking and poaching). These hypotheses are evaluated while concurrently examining the influence of exchange hazards (relationship-specific investments and technological uncertainty) on provider shirking and poaching. The results offer strong evidence that buyer reliance on mediated forms of power (i.e. rewards, coercive, legal legitimate) enhance the risk of both provider shirking and poaching, while non-mediated power (i.e. expert, referent) is associated with a diminished level of opportunistic behavior. Interestingly, relationship-specific investments have a significant effect on some forms of opportunistic behavior but not on other forms of opportunistic behavior. Technological uncertainty did not have a significant impact on provider opportunism.     

Offshore outsourcing of professional services: A transaction cost economics perspective

This research utilizes the framework of transaction cost economics (TCE) to develop an understanding of how firms manage the costs and risks of offshore outsourcing of professional services. This research examines the perspectives of eight organizations through interviews with 10 high-ranking supply management executives. The paper first explores the rationale for offshore outsourcing among the organizations studied. Using the tenants of TCE, this paper postulates that fixed costs of establishing the relationship dominate the variable costs of day-to-day transactions, and that organizations will not offshore outsource areas where there is high perceived degree of unmanageable risk. The paper expands on themes provided by TCE and offers some lessons learned, and guidelines for managing and controlling offshore outsourced services relationships.     

Recruitment Process Outsourcing and Applicant Reactions: When Does Image Make a Difference?

Many organizations transfer parts of their recruitment process to external service providers—often referred to as recruitment process outsourcing (RPO)—to save costs and enhance the quality of their recruitment procedures. However, contrary to the expectations regarding RPO, Wehner, Giardini, and Kabst (2012) found that RPO might cause negative reactions to recruitment procedures among graduates. We extend that study by incorporating a brand equity perspective in examining whether employer image and service provider image counterbalance negative reactions among graduates. Utilizing a scenario‐based, between‐subject design, we obtain results that show that the extent of RPO negatively influences applicant reactions regardless of the employer's or service provider's image. Furthermore, we find negative mediating effects of RPO on job acceptance intention. However, the perceived fit between employer image and service provider image positively influences applicant reactions. Moreover, employer image positively influences employer attractiveness and service provider image positively influences applicants’ satisfaction with the recruitment process. Thus, a strong employer image and service provider image partially compensate for the negative effects of RPO on applicant reactions. © 2014 Wiley Periodicals, Inc.     

Strategic segmentation in front-line services: matching customers,employees and human resource systems

This paper examines variation in the use of high involvement work practices in service and sales operations. I argue that the relationship between the customer and front-line service provider is a central feature that distinguishes production-level service activities from manufacturing. In particular, through strategic segmentation, firms are able to segment customers by their demand characteristics and to match the complexity and potential revenue stream of the customer to the skills of employees and the human resource system that shapes the customer–employee interface. Unlike manufacturing, where high involvement systems have emerged in a wide variety of product markets, therefore, service organizations are likely to use high involvement systems only to serve higher value-added customers because of the high costs of these systems and the labour-intensive nature of services. Data from a nationally random sample of 354 call centres in US telecommunications documents this pattern: from classic mass production approaches for back office workers and increasingly for front office residential service agents, to greater involvement for small business service providers and high involvement practices for middle-market service agents.     

Building manufacturing flexibility with strategic suppliers and contingent effect of product dynamism on customer satisfaction

A critical capability sought by an increasing number of firms is manufacturing flexibility, because it allows to effectively respond to dynamic markets. Grounded upon a supply chain perspective, this paper aims to assess antecedents of manufacturing flexibility that stem from the upstream relationships with strategic suppliers. Additionally, it is one of the first to analyze the contingent effect of product dynamism on the impact of manufacturing flexibility on downstream customer satisfaction. We apply structural equation modeling to a sample of 155 companies in order to analyze our hypotheses. Results strongly indicate that buyer-supplier collaboration facilitates inter-organizational learning that in turn allows organizations to develop manufacturing flexibility and increase customer satisfaction. Approaching manufacturing flexibility from a broader supply chain view thus pays off. Moreover, we apply multi-group confirmatory factor analysis to explore the contingent effect of product dynamism on the relationship between manufacturing flexibility and customer satisfaction. Results suggest a stronger impact of manufacturing flexibility on performance in the context of higher product dynamism in companies’ customer markets, confirming the importance of a contingency view to flexibility.     

中国服务外包业现状、问题与对策：基于中国与ORN数据的比较分析

离岸服务外包产业发展的好坏在当前我国实现经济转型深化改革开放的关键阶段有重要的战略意义。但未来整个行业的发展则依赖于服务外包企业在竞争日益加剧的全球离岸服务外包市场中竞争优势的建立和强化。本研究通过交大一杜克中关全球外包联合研究中心平台,就中国服务外包企业和国际服务外包企业的竞争力、业务状况及未来发展预期和增长与创新战略意愿等进行了调查研究。对比分析发现,中国服务外包企业存在整体规模偏小、服务外包经验不足、业务标准化程度不高、成本优势不显著等问题。我们分析了问题产生的原因及后果,并从企业和政府的角度提出了有关的对策建议。     

The perilous effects of capability loss on outsourcing management and performance

The outsourcing of manufacturing activities and business processes has emerged as a prevalent business practice in many industries. Given this state, the lackluster performance of an alarmingly high proportion of outsourcing initiatives is somewhat surprising. In an effort to achieve aggressive cost savings objectives, many outsourcing engagements are associated with organizational resources being disposed of which can lead to a significant operational capability loss on the part of the outsourcing firm. Surprisingly little empirical research has dealt with the issues arising from this capability loss frequently associated with outsourcing. This study strives to address this void. Drawing on multiple theoretical perspectives, this study investigates the direct impact that capability loss has on outsourcing performance, and also the impact it has on the outsourcing firm's ability to effectively manage its relationship with the outsourcing provider. Results from our hierarchical regression analysis on 198 outsourcing initiatives suggest an inadequate capability evaluation up front can lead to a more substantive capability loss. Subsequently, we find that a more extensive capability loss has a direct negative effect on outsourcing performance. Prior studies have established the significant positive effect that developing a committed and cooperative relationship with the provider has on outsourcing performance. Our results corroborate these previous findings, and also demonstrate that capability loss inhibits the outsourcing firm's efforts to develop a committed and cooperative relationship with the outsourcing provider.     

服务外包风险的控制机制研究

服务外包有助于企业降低成本并且提高企业竞争优势。然而各种不确定性因素的存在使得服务外包伴随着潜在的风险,因此,如何有效地管理和控制服务外包风险是理论界和企业界关注的焦点。     

Risk allocation in service triads – The case of Dutch and Finnish home care procurement

We compare how Finland and the Netherlands organize home care services, both in legislation and in procurement practices, from a service triad risk perspective. We find Finnish public bodies rely to a great extent on inhouse provision and hybrid outsourcing. Dutch public bodies rely completely on outsourcing, using framework agreements with many care providers in parallel. Incentives used in contracts affect financial and service quality risks assumed by buyers, suppliers, and end-customers in the triad. This research improves our understanding of risk allocation among the actors in the service triad based on buyer decisions on outsourcing and supply market conditions. The risk profiles for all three actors in the home care service triad are affected by the manner in which public bodies outsource home care services: the purchasing practices. The delivery method (whether public and private or all private) and the number of providers impact the information position of the municipality versus the care provider in the triad.     

R&D Outsourcing and the Effectiveness of Intangible Investments: Is Proprietary Core Knowledge Walking out of the Door?

Intangible relationship‐specific investments can be double‐edged swords, as they facilitate not only the governance of business relationships but also undesired knowledge transfers. Building on transaction costs theory and the relational view of alliances, we analyse the effectiveness of these investments in R&D outsourcing agreements from the viewpoint of the client. We argue that, when outsourcing to business firms, the safeguards adopted by the clients to prevent spillovers may reduce the effectiveness of the supplier's specialized investments. Using original survey data from 170 European and US technology‐intensive firms, we find that the contribution of these investments to client performance decreases the more a client's core knowledge is required to perform the service, except when outsourcing to non‐profits. This suggests that as the appropriability hazards associated with outsourcing to business firms rise, the client is able to capture less value from the supplier's relationship‐specific investments.     

Operational,organizational, and human resource factors predictive of customer perceptions of service quality

The overall objective of this study was to examine the relationship between total quality management (TQM) factors and business unit performance as measured by customer perceptions of service quality. Data were collected from 26 business units of larger service organizations. Analyses confirmed our hypotheses that customer perceptions would be a function of a combination of operational, organizational, and human resource factors that have been associated with TQM.     

企业物流外包决策的经济准则

通过建立模型,比较企业物流外包前后的利润水平,提出一个判别物流外包能否增加企业利润的准则。该准则表明,并非只要服务商的成本低于外包企业,外包企业就能通过物流外包提高利润水平,而是存在一个阈值。该阈值由外包企业的生产、销售、自营物流成本等因素综合决定,只有将物流业务外包给成本低于该阈值的服务商,才能提高外包企业的利润水平。     

Refashioning Organizational Boundaries: Outsourcing Customer Service Work*

abstract In recent years there has been a discernible trend towards the outsourcing and subcontracting of work. However, there has been very little empirical research on employees' attitudes to work in outsourced firms. This study is conducted in the area of call centre services where there has been a substantial growth in the provision of external market suppliers. It examines employees' perceptions of their work and employment arrangements in both an in‐house producer and an external service provider and identifies and compares the factors that shape their organizational commitment and intentions to quit. The research found that the character of the internal labour market and the nature of the work regime were more important explanations of organizational commitment and intentions to quit in the external market supplier than in the in‐house producer. The paper discusses the implications of these findings for the quality of customer service provided under subcontracting arrangements.     

基于KIFA的物流外包服务商选择机制研究

本文主要研究昆明国际花卉拍卖交易中心(KIFA)物流外包服务商的选择机制,从KIFA拍卖交易完成后到最终的鲜花零售店的各个物流环节。本文提出了基于招投标的配送服务商的初选方法,再用AHP方法[1]最终确定最佳配送服务商。从而提高了昆明国际花卉拍卖交易中心的花卉物流服务、降低了成本、提高了客户满意度,同时,为同类花卉拍卖交易中心物流服务商的选择提供参考依据。     

高校后勤社会化改革的服务外包模式研究——以D大学为例

高校后勤服务外包是高校后勤社会化改革的重要形式。本文针对高校后勤社会化改革中的服务外包问题,以D大学为例,采用问卷调查等方法,剖析了高校后勤社会化改革中的服务外包实体财务情况及其服务满意度,结果发现,D大学部分服务型实体外包会导致服务满意度下降等弊端。基于案例分析,本文兼顾高校后勤服务外包中普遍存在的产权不清晰及代理风险等问题,最终构建了基于分类管理与部分外包的高校后勤服务外包框架。这对中国高校后勤社会化改革的服务外包实践提供了参考和借鉴。     

Multi-layer quality function deployment (QFD) approach for improving the compromised quality satisfaction under the agency problem: A 3D QFD design for the asset selection problem in the shipping industry

The aim of this paper is to improve the quality function deployment (QFD) method by utilizing requirements of both the major customer and the service provider. The QFD method was first applied to the shipbuilding industry and the main goal of the method is to improve the production processes by using customer requirements in connection with the related technical measures of the product. However, one of the critical criticisms of the QFD is based on the lack of proper budget assessment and the satisfaction of the producer (or service provider). The multi-layer QFD design is proposed to collect responses from both customer and the service provider so as to ensure satisfaction of all parties including financial feasibility of the intended improvements. Hence, the agency problem between parties will be eliminated.