Transaction costs, technology, and the scope of human resource outsourcing relationships

Derek Ruth, Purdue University

Abstract

This dissertation develops and tests a theoretical framework designed to provide a better understanding of the way that interfirm relationships are managed. To that end, two streams of literature are brought together: transaction cost economics (TCE) and that related to interfirm relationships. TCE has been widely used to explore the make-or-buy decision for individual services, but until now has been confined to the single service context. On the other hand, research in the area of interfirm relationships has tended to focus on the antecedents of relationship formation (and, to some extent, dissolution), while paying much less attention to the ongoing management of there relationships. This study takes an in depth look at the management and performance of multi-service relationships where respondent firms have one or more services outsourced to the same vendor. In particular, the study looks at two key choices in the management of the relationship: level of outsourcing, and scope of the relationship, as well as their performance implications. In addition to the typical use of asset specificity to explain governance choice, the study looks at the influence of the use of information technology in service provision and interorganizational trust on these two choices. A survey of 80 Canadian firms reveals that there is endogeneity of choice in the two governance decisions. As well, it appears that excessive reliance on information technology for service provision can harm both the performance of an individual service, perhaps even harming the relationship as a whole.

Degree

Ph.D.

Advisors

Brush, Purdue University.

Subject Area

Management

COinS