Achieving Strategic Innovation through Information Technology Outsourcing: A Configurational Approach

Recent Information Technology outsourcing (ITO) literature identifies an inherent tension in outsourcing: firms that use ITO to gain efficiency (e.g., cost reductions) will find it difficult to achieve strategic innovation through ITO. Best practices for efficiency gaining (e.g., having a detailed contract) can in fact inhibit firms’ ability to develop new products, services, or enter new markets. To date, few empirical studies examine this paradox. Our study adds to this growing literature by using a configurational approach to examine 41 large US enterprises of their ITO practices to achieve strategic innovation. Our findings suggest that a “mediated multi-outsourcing” strategy can indeed lead to strategic innovation. Moreover, contrary to the extant literature’s suggestion that detailed contracts can be an inhibitor to strategic innovation, we show that not using detailed contracts will in fact lead to the lack of strategic innovation. Our findings call for further research to understand the enablers and inhibitors of strategic innovation through ITO