Examining the Implications of Organizational Structure Changes from a Transaction Cost Perspective: a Longitudinal Study of an Outsourcing Vendor
AbstractSince firms’ rationale to outsource parts of their IT function are mainly based on cost reduction, many vendors applied a high level of standardization in organizing the delivery of IT services to decrease their cost level. As the environment of firms changes frequently, it is of key importance for vendors to assess how these exogenous developments affect their organizational structure. Changing the organizational structure, however, may affect the cost structure of the outsourcing arrangement over time. Drawing on the Transaction Cost Economics the objective of our study is to examine how environmental uncertainty and asset specificity affect vendors’ functional organizational structure and, in turn, influences ex-post transaction costs. A retrospective view on a case study was investigated from the perspective of a global outsourcing vendor. Studying various client episodes and the vendor’s response we find that an increase of the degree of asset specificity leads to higher transaction costs. Our results suggest that the vendor’s functional organizational structure can be considered as a mediator in minimizing the ex-post transaction costs. Executives and managers need to be aware that uncertainty and asset specificity may lead to an increase of the coordination costs. Therefore, vendors should need to reassess their organizational structure regularly and implement adjustments to control their ex-post transaction costs. The paper concludes with implications for practitioners that can help vendors in managing their cost structure.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Maastricht School of Management in its series Working Papers with number 2011/12.
Length: 26 pages
Date of creation: Sep 2011
Date of revision:
outsourcing; strategic management; organizational structure; transaction cost;
Find related papers by JEL classification:
- M19 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Other
- M15 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - IT Management
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-11-28 (All new papers)
- NEP-CSE-2011-11-28 (Economics of Strategic Management)
- NEP-PPM-2011-11-28 (Project, Program & Portfolio Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- John, George & Weitz, Barton A, 1988. "Forward Integration into Distribution: An Empirical Test of Transaction Cost Analysis," Journal of Law, Economics and Organization, Oxford University Press, vol. 4(2), pages 337-55, Fall.
- Doll, WJ & Vonderembse, MA, 1991. "The evolution of manufacturing systems: Towards the post-industrial enterprise," Omega, Elsevier, vol. 19(5), pages 401-411.
- Spekle, Roland F., 2001. "Explaining management control structure variety: a transaction cost economics perspective," Accounting, Organizations and Society, Elsevier, vol. 26(4-5), pages 419-441.
- Jér�me Barthélemy & Bertrand V. Quélin, 2006. "Complexity of Outsourcing Contracts and "Ex Post" Transaction Costs: An Empirical Investigation," Journal of Management Studies, Wiley Blackwell, vol. 43(8), pages 1775-1797, December.
- Germain, Richard, 1996. "The role of context and structure in radical and incremental logistics innovation adoption," Journal of Business Research, Elsevier, vol. 35(2), pages 117-127, February.
- Paswan, Audhesh K. & Dant, Rajiv P. & Lumpkin, James R., 1998. "An Empirical Investigation of the Linkages among Relationalism, Environmental Uncertainty, and Bureaucratization," Journal of Business Research, Elsevier, vol. 43(3), pages 125-140, November.
- Williamson, Oliver E, 1979. "Transaction-Cost Economics: The Governance of Contractural Relations," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 233-61, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maud de By).
If references are entirely missing, you can add them using this form.