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Outsourcing And Market Value Of The Firm: Toward A Comprehensive Model

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  • Pankaj Nagpal
  • Andreas I. Nicolaou
  • Kalle Lyytinen

Abstract

We analyze the effect of buyer, contract, and vendor characteristics on abnormal stock returns among firms that have announced large scale Information Technology (IT) and Business Process outsourcing (BPO) contracts. We draw upon a comprehensive dataset on outsourcing announcements, augmented with data from public sources. Salient buyer factors examined include use of a wide range of organizational controls. On the vendor side, we examine the impact of vendor size, contract size and reputation. Our study shows that use of behavior controls, outcome controls (negative), vendor reputation, and industry of buyer firm affect market value. When limited to buyer related factors, use of behavior and clan controls is positively related to abnormal returns around IT outsourcing announcements. An interesting finding is that IT and BPO success require different sets of controls. Copyright © 2014 John Wiley & Sons, Ltd.

Suggested Citation

  • Pankaj Nagpal & Andreas I. Nicolaou & Kalle Lyytinen, 2014. "Outsourcing And Market Value Of The Firm: Toward A Comprehensive Model," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 21(1), pages 19-38, January.
    • Handle: RePEc:wly:isacfm:v:21:y:2014:i:1:p:19-38
    DOI: 10.1002/isaf.1350
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    1. Daniel E. O'Leary, 2015. "The 50 Most Downloaded Papers in Intelligent Systems in Accounting, Finance and Management in 2014," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 22(4), pages 283-288, October.
    2. Dahlgrün, Philipp W. & Bausch, Andreas, 2019. "How Opportunistic Culture Affects Financial Performance in Outsourcing Relationships: A Meta-Analysis," Journal of International Management, Elsevier, vol. 25(1), pages 81-100.

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