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Governance Choice in Global Sourcing of Services: The Impact on Service Quality and Cost Saving Performance

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Abstract

This article deals with the performance implications of the governance mode (captive offshoring versus outsourcing) selected when companies offshore service activities, which is still quite controversial in the literature. After accounting for endogeneity issues, we investigate the relationship between governance and performances (both in terms of cost saving and service quality) on a sample of 132 initiatives from the 2009 Offshoring Research Network survey. Our results show that the alignment of the governance choice with an extended transaction cost economics approach leads to better performances. However, the impact of a possible misalignment: (1) is asymmetric, as only the failure to undertake a captive mode negatively affects performance; and (2) negatively affects service quality more than cost saving.

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