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

Yili Hong, Paul A. Pavlou

Research output: Contribution to journalArticle

29 Scopus citations

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

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

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