To Mitigate The Agency Risk In Offshore Outsourcing Through The Transfer Of Personnel

Proceedings of ‏The 3rd International Conference on Research in Management and Economics

Year: 2020

DOI: https://www.doi.org/10.33422/3rd.imeconf.2020.09.196

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To Mitigate The Agency Risk In Offshore Outsourcing Through The Transfer Of Personnel

Florence Duvivier, Carine Peeters

ABSTRACT: 

We study how the exchange of personnel between clients and offshore providers contributes to effective relational governance of offshore outsourcing. More specifically, the paper elucidates the associated mechanisms that explain how the exchange of personnel help reduce agency risk, and synthesize them in an integrative framework. Further the qualitative study shows the reasons bi-directional exchange of personnel takes place, and show how their actions differs in function of the direction of the transfer. Based on that insight, we identify three main mechanisms whereby expatriation helps reduce agency risk in offshore outsourcing – namely i) via a reduction in the information asymmetry between clients and offshore providers, ii) via the increased motivation of offshore teams to comply with clients’ expectations, and iii) via the empowered trust between clients and offshore providers. The study also points to a number of possible drawbacks client firms must account for when planning to send expatriates to offshore providers, and which further explains that the reverse process of welcoming expatriates from offshore providers into the client organization holds significant potential to offshore outsourcing relations.

Keywords: Offshore outsourcing, Expatriate, Agency risk.