On buyer selection of service providers in online outsourcing platforms for IT services

Yili Hong, Paul A. Pavlou

Research output: Contribution to journalArticle

17 Citations (Scopus)

Abstract

The Internet has presumably created a level playing field that allows any service provider across the globe to compete for contracts on online outsourcing platforms for information technology (IT) services. In this paper, we empirically examine (a) how country (language, time zone, cultural) differences and the country's IT development affect buyers' selection of service providers in online outsourcing platforms; and (b) how the reputation of service providers moderates the proposed effects of country differences and the country's IT development. We integrated a unique data set formed by a sample of 11,541 software development projects from an online outsourcing platform matched with archival sources on the language, time zone, culture, and IT development of countries. Since price is typically endogenous in any supply demand system, we used the exogenous variation of the normalized exchange rate of the currency among countries, as a "cost-shifter" type instrumental variable (IV) for econometric identification. Our panel data analyses results (both with and without IV) show that buyers are negatively affected by country differences in terms of language, time zone, and culture, and prefer service providers from countries with higher IT development. Notably, the reputation of service providers attenuates the negative effects of language and cultural (but not time zone) differences, while it substitutes the positive effect of the country's IT development. We discuss the study's theoretical and managerial implications for understanding the global dynamics of online outsourcing platforms and better designing these platforms.

Original languageEnglish (US)
Pages (from-to)547-562
Number of pages16
JournalInformation Systems Research
Volume28
Issue number3
DOIs
StatePublished - Sep 1 2017

Fingerprint

Outsourcing
outsourcing
service provider
Information technology
information technology
language
reputation
rate of exchange
high technology
software development
cultural difference
currency
development project
econometrics
Service provider
Buyers
Software engineering
Technology development
Internet
supply

Keywords

  • Country differences
  • Country IT development
  • IT services
  • Online outsourcing platforms
  • Reputation

ASJC Scopus subject areas

  • Information Systems
  • Computer Networks and Communications
  • Information Systems and Management
  • Library and Information Sciences

Cite this

On buyer selection of service providers in online outsourcing platforms for IT services. / Hong, Yili; Pavlou, Paul A.

In: Information Systems Research, Vol. 28, No. 3, 01.09.2017, p. 547-562.

Research output: Contribution to journalArticle

@article{79667ecfc3854693849f5b583dd1577c,
title = "On buyer selection of service providers in online outsourcing platforms for IT services",
abstract = "The Internet has presumably created a level playing field that allows any service provider across the globe to compete for contracts on online outsourcing platforms for information technology (IT) services. In this paper, we empirically examine (a) how country (language, time zone, cultural) differences and the country's IT development affect buyers' selection of service providers in online outsourcing platforms; and (b) how the reputation of service providers moderates the proposed effects of country differences and the country's IT development. We integrated a unique data set formed by a sample of 11,541 software development projects from an online outsourcing platform matched with archival sources on the language, time zone, culture, and IT development of countries. Since price is typically endogenous in any supply demand system, we used the exogenous variation of the normalized exchange rate of the currency among countries, as a {"}cost-shifter{"} type instrumental variable (IV) for econometric identification. Our panel data analyses results (both with and without IV) show that buyers are negatively affected by country differences in terms of language, time zone, and culture, and prefer service providers from countries with higher IT development. Notably, the reputation of service providers attenuates the negative effects of language and cultural (but not time zone) differences, while it substitutes the positive effect of the country's IT development. We discuss the study's theoretical and managerial implications for understanding the global dynamics of online outsourcing platforms and better designing these platforms.",
keywords = "Country differences, Country IT development, IT services, Online outsourcing platforms, Reputation",
author = "Yili Hong and Pavlou, {Paul A.}",
year = "2017",
month = "9",
day = "1",
doi = "10.1287/isre.2017.0709",
language = "English (US)",
volume = "28",
pages = "547--562",
journal = "Information Systems Research",
issn = "1047-7047",
publisher = "INFORMS Inst.for Operations Res.and the Management Sciences",
number = "3",

}

TY - JOUR

T1 - On buyer selection of service providers in online outsourcing platforms for IT services

AU - Hong, Yili

AU - Pavlou, Paul A.

PY - 2017/9/1

Y1 - 2017/9/1

N2 - The Internet has presumably created a level playing field that allows any service provider across the globe to compete for contracts on online outsourcing platforms for information technology (IT) services. In this paper, we empirically examine (a) how country (language, time zone, cultural) differences and the country's IT development affect buyers' selection of service providers in online outsourcing platforms; and (b) how the reputation of service providers moderates the proposed effects of country differences and the country's IT development. We integrated a unique data set formed by a sample of 11,541 software development projects from an online outsourcing platform matched with archival sources on the language, time zone, culture, and IT development of countries. Since price is typically endogenous in any supply demand system, we used the exogenous variation of the normalized exchange rate of the currency among countries, as a "cost-shifter" type instrumental variable (IV) for econometric identification. Our panel data analyses results (both with and without IV) show that buyers are negatively affected by country differences in terms of language, time zone, and culture, and prefer service providers from countries with higher IT development. Notably, the reputation of service providers attenuates the negative effects of language and cultural (but not time zone) differences, while it substitutes the positive effect of the country's IT development. We discuss the study's theoretical and managerial implications for understanding the global dynamics of online outsourcing platforms and better designing these platforms.

AB - The Internet has presumably created a level playing field that allows any service provider across the globe to compete for contracts on online outsourcing platforms for information technology (IT) services. In this paper, we empirically examine (a) how country (language, time zone, cultural) differences and the country's IT development affect buyers' selection of service providers in online outsourcing platforms; and (b) how the reputation of service providers moderates the proposed effects of country differences and the country's IT development. We integrated a unique data set formed by a sample of 11,541 software development projects from an online outsourcing platform matched with archival sources on the language, time zone, culture, and IT development of countries. Since price is typically endogenous in any supply demand system, we used the exogenous variation of the normalized exchange rate of the currency among countries, as a "cost-shifter" type instrumental variable (IV) for econometric identification. Our panel data analyses results (both with and without IV) show that buyers are negatively affected by country differences in terms of language, time zone, and culture, and prefer service providers from countries with higher IT development. Notably, the reputation of service providers attenuates the negative effects of language and cultural (but not time zone) differences, while it substitutes the positive effect of the country's IT development. We discuss the study's theoretical and managerial implications for understanding the global dynamics of online outsourcing platforms and better designing these platforms.

KW - Country differences

KW - Country IT development

KW - IT services

KW - Online outsourcing platforms

KW - Reputation

UR - http://www.scopus.com/inward/record.url?scp=85035361015&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85035361015&partnerID=8YFLogxK

U2 - 10.1287/isre.2017.0709

DO - 10.1287/isre.2017.0709

M3 - Article

AN - SCOPUS:85035361015

VL - 28

SP - 547

EP - 562

JO - Information Systems Research

JF - Information Systems Research

SN - 1047-7047

IS - 3

ER -