Substitutes or Complements? A Framework for Investigating the Dynamic Interplay of IS Outsourcing Governance Mechanisms

Studies investigating the question whether contractual and relational governance are substitutes or complements have been based on contradictory conceptualizations and have produced conflicting research results. This caused a controversial debate in the field of IS outsourcing concerning the relationship of governance mechanisms. Thus, the goal of this study is to clarify these inconsistencies. For this purpose we revisit the relationship between contractual and relational governance using a refined conceptual framework, which breaks down contractual and relational governance along two dimensions: foundation and action. Based on our framework, we conducted 21 semi-structured interviews at a global bank for a post-hoc analysis of governance mechanisms within five IS outsourcing projects. Our preliminary results reveal the existence of dynamic patterns of interaction between the foundation dimension (contract, trust) and the corresponding action dimension (formal control, informal control) of contractual and relational governance. In contrast to previous research, they explain complementarity and substitution as the outcome of dynamic interactions between the two governance dimensions of our framework