Outsourcing and Market Value of the Firm: Toward a Comprehensive Model

Int. J. Intell. Syst. Acc. Fin. Mgmt, 2010, DOI: 10.1002/isaf.1350

Posted: 1 Mar 2014

See all articles by Pankaj Nagpal

Pankaj Nagpal

Case Western Reserve University; Central Connecticut State University

Andreas I. Nicolaou

Bowling Green State University - Accounting & Management Information Systems

Kalle J. Lyytinen

Case Western Reserve University - Weatherhead School of Management

Date Written: January 6, 2010

Abstract

We analyze the effect of buyer, contract, and vendor characteristics on abnormal stock returns among firms that have announced large scale Information Technology (IT) and Business Process outsourcing (BPO) contracts.We draw upon a comprehensive dataset on outsourcing announcements, augmented with data from public sources. Salient buyer factors examined include use of a wide range of organizational controls. On the vendor side, we examine the impact of vendor size, contract size and reputation. Our study shows that use of behavior controls, outcome controls (negative), vendor reputation, and industry of buyer firm affect market value. When limited to buyer related factors, use of behavior and clan controls is positively related to abnormal returns around IT outsourcing announcements. An interesting finding is that IT and BPO success require different sets of controls.

Keywords: IT outsourcing; business process outsourcing; event study; organizational controls; median regression

Suggested Citation

Nagpal, Pankaj and Nicolaou, Andreas I. and Lyytinen, Kalle J., Outsourcing and Market Value of the Firm: Toward a Comprehensive Model (January 6, 2010). Int. J. Intell. Syst. Acc. Fin. Mgmt, 2010, DOI: 10.1002/isaf.1350, Available at SSRN: https://ssrn.com/abstract=2402882

Pankaj Nagpal (Contact Author)

Case Western Reserve University ( email )

10900 Euclid Ave.
Cleveland, OH 44106-7235
United States

Central Connecticut State University ( email )

1615 Stanley Street
New Britian, CT 06050
United States

Andreas I. Nicolaou

Bowling Green State University - Accounting & Management Information Systems ( email )

Bowling Green, OH 43403
United States
419-372-2932 (Phone)
419-372-2875 (Fax)

Kalle J. Lyytinen

Case Western Reserve University - Weatherhead School of Management ( email )

10900 Euclid Ave.
Cleveland, OH 44106-7235
United States

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