Journal of Strategic Information Systems 23 (2014) 190–209

Contents lists available at ScienceDirect

Journal of Strategic Information Systems

journal homepage: www.elsevier .com/ locate / js is

Organizational responsiveness to anti-offshoring institutionalpressures

http://dx.doi.org/10.1016/j.jsis.2014.05.0010963-8687/� 2014 Elsevier B.V. All rights reserved.

⇑ Corresponding author. Tel.: +1 314 516 6267; fax: +1 314 516 6827.E-mail address: shajikhan@umsl.edu (S.A. Khan).

1 Tel.: +1 314 516 6127; fax: +1 314 516 6827.2 ComputerWorld, available at: http://www.computerworld.com/s/article/9143338/U.S._senators_urge_utility_to_keep_IT_jobs_onshore (retrieved 2

Shaji A. Khan ⇑, Mary C. Lacity 1

College of Business, University of Missouri-St. Louis, One University Boulevard, St. Louis, MO 63121, United States

a r t i c l e i n f o a b s t r a c t

Article history:Received 17 April 2013Received in revised form 25 May 2014Accepted 27 May 2014Available online 16 June 2014

Keywords:OffshoringAnti-offshoring pressuresInstitutional influences against offshoringInformation technology offshoringBusiness process offshoring

We explore the extent of organizational responsiveness to pressures from institutionalconstituents against offshoring of information technology and business process services.Drawing on a theoretical framework that integrates institutional and strategic explana-tions, we proposed that organizational responsiveness to anti-offshoring institutional pres-sures is a function of both the characteristics of such pressures as well as organizations’prior success with offshoring. Results based on survey data from 84 offshoring client orga-nizations indicate the following: Both greater organizational expectations of enhancedsocial legitimacy and mimetic influences from other organizations led to greater organiza-tional responsiveness. Both conflict of institutional expectations with organizational goalsand greater regulatory environment uncertainty reduced responsiveness. Organizationaldependence on a key pressuring constituent had no effect. Surprisingly, organizational suc-cess with offshoring had no direct effect on responsiveness and we examine why this mightbe so. However, it attenuated the otherwise strong positive effect of social legitimacy andexacerbated the negative effect of regulatory environment uncertainty.

� 2014 Elsevier B.V. All rights reserved.

1. Introduction

Despite its prevalence and long history, offshoring—the business practice of sourcing information technology (IT) or busi-ness process (BP) services from abroad either through a third-party service provider or via captive operations—(Oshri andCorbett, 2011) continues to remain controversial (Bertrand, 2011; Doh, 2005; Levy, 2005; Venkatraman, 2004). The contro-versy primarily surrounds contended domestic job losses and downward pressure on wages (Levy, 2005; Venkatraman,2004) when organizations move work offshore. In the back-drop of public backlash and political uproar against offshoring,organizations have faced increasing pressures from a variety of institutional stakeholders to curb their offshore engagements(Bertrand, 2011; King, 2005; Mankiw and Swagel, 2006; Venkatraman, 2004). For example, according to a January 2010report in ComputerWorld, two influential senators from New York publicly urged National Grid USA, a utility company; tonot offshore close to 1200 mostly IT jobs to India.2

Public outcries against offshoring and concerns of professionals regarding job losses (see Shao and David, 2007; Thelenet al., 2010), activism from union groups, legislative attempts aimed at directly curbing offshoring (for example, 2013 UnitedStates Bill titled ‘‘HR 1086: Offshoring Prevention Act’’, a 2012 Bill titled ‘‘HR 5542: Bring Jobs Home Act’’, and a 2010 US Senate

3.03.13).

S.A. Khan, M.C. Lacity / Journal of Strategic Information Systems 23 (2014) 190–209 191

Bill titled ‘‘S.3816 – Creating American Jobs and Ending Offshoring Act’’), and public denouncements of offshoring by high pro-file politicians exemplify the broader calls against offshoring.3

Regardless of the debate over whether calls against offshoring are appropriate, necessary, or effective, scholars doacknowledge the broader anti-offshoring environment across developed Western economies (Bertrand, 2011; Hirschheimand Newman, 2010; King, 2005; Mankiw and Swagel, 2006; Venkatraman, 2004). However, given the numerous strategicdrivers of offshoring on the one hand and the pervasiveness of calls against offshoring on the other, it is difficult to imagineorganizations as invariably conforming or resistant to pressures against offshoring.

Extant literature (please see Table 1 for a brief summary) on offshoring suggests that labor costs savings is one of theprimary drivers of offshoring (King and Torkzadeh, 2008; Lacity et al., 2009). However, a variety of strategic driversbeyond labor arbitrage have emerged. These range from access to qualified personnel, faster delivery speeds, businessor process performance improvements, access to new markets, refocusing on core business (e.g., Carmel and Tjia, 2005;Currie et al., 2008; Lacity et al., 2011), and the conduct of core activities such as innovation (Nieto and Rodrı́guez,2011). An often overlooked set of drivers include corporate tax policies in onshore and offshore countries that togethermay incentivize organizations to engage in offshoring and gravitate toward captive offshoring models (Bradley, 2011;Clausing and Avi-Yonah, 2007). There is some indication that firms do accrue the strategic benefits which initially ledthem to consider offshoring (Gokhale, 2007; Oshri et al., 2009b). However, this stream of research also suggests that thereis substantial variation in the extent of benefits derived by client firms (e.g., Dibbern et al., 2008; King and Torkzadeh,2008; Rottman and Lacity, 2008). Other work on offshoring highlights idiosyncratic challenges and risks pertinent to off-shore engagements (Dibbern et al., 2008; Gregory et al., 2013; Iacovou and Nakatsu, 2008; Sakthivel, 2007). Another set ofstudies have focused on captive offshore arrangements in particular and highlight the primary reasons firms opt for inter-nal governance of offshored work along with the associated challenges of such arrangements (e.g., Oshri et al., 2009b).Recent work also provides a glimpse into the direct impact of offshoring on the skill composition of onshore IT workers(e.g., Tambe and Hitt, 2012).

Noticeably absent from the literature is an explicit consideration of the broader institutional environment in relation toeither the drivers or consequences of offshoring, especially when institutional processes against offshoring are concerned.While the strategic aspects of offshoring are well studied, the extent to which organizations are responsive to broader callsfor the elimination (or at least reduction) of offshoring remains an empirical question. Little is empirically known about theprominence of organizational strategic considerations vis-à-vis outside contention regarding offshoring. Further, it is unclearhow the extent of strategic benefits organizations derive from offshoring is related to their responsiveness to calls againstoffshoring. Given the relevance for clients and service providers, scholars have called for a more systematic examinationof such broader calls against offshoring and their impact on the future of sourcing (Lacity et al., 2010). More important,despite long standing calls for explicitly incorporating policy in strategic information systems research (Gable, 2010;Galliers and Jarvenpaa, 2002), the implications of and for offshoring related public policy, especially in the anti-offshoringcontext remain unaddressed.

In this study we address the above gaps by framing this issue within a theoretical lens that integrates institutional andstrategic explanations of how organizations respond to institutional pressures (Oliver, 1991; Pache and Santos, 2010). Weuse the phrase ‘anti-offshoring institutional pressures’ broadly to denote expectations or demands from institutional constit-uents that organizations should reduce or eliminate offshoring. The institutional constituents include, but are not limited to,the general public and public opinion, governments, regulatory structures, laws, professions, unions, and interest groups.This view of institutional constituents and pressures is consistent with prior literature (e.g., Goodstein, 1994; Oliver,1991; Pache and Santos, 2010; Scott, 1995).

The purpose of this research is to develop and test a theory-based model that relates both the characteristics of anti-offsh-oring institutional pressures and organizations’ strategic considerations with organizational responsiveness to anti-offshor-ing institutional pressures. We develop a conceptual model based on Oliver’s (1991) theoretical framework and test itspredictions using data from a survey of 84 offshoring client organizations. The context of this study is IT and BP offshoringand the unit of analysis is the organization.

Thus, this research addresses the following broad questions in the context of offshoring. How responsive are organizationsto anti-offshoring pressures? Do characteristics of anti-offshoring pressures determine organizational responsiveness? Does orga-nizational offshoring success determine organizational responsiveness? Does offshoring success interact with characteristics of anti-offshoring pressures to determine organizational responsiveness?

In the next section we discuss the theoretical framework and develop hypotheses. Following this, we present the methodand results. We then discuss the findings, their implications for research and practice, and limitations and suggestions forfuture research, prior to concluding.

3 Examples of other legislative attempts at curbing offshoring include H.R.516: Bring Jobs Back to America Act (2011), H.R.1378: Fighting for American Jobs Act(2011), H.R.1354: American Jobs Matter Act (2011). Details available at: http://thomas.loc.gov/home/thomas.php. Also see: White House Weekly Address:September 25, 2010. Available online at: http://www.whitehouse.gov/the-press-office/2010/09/25/weekly-address-president-obama-gop-leadership-stand-ing-outsourcing-and-s (retrieved 25.03.13). For an example of union activism related to this issue see: http://www.aflcio.org/Blog/Economy/AFL-CIO-Kicks-Off-Bring-Jobs-Home-Campaign (retrieved 25.03.13).

Table 1Extant literature on offshoring relevant to this study.

Major themesKey insights (select references)

Drivers of offshoringEarlier studies and recent reviews of offshoring literature indicate cost reduction to be a dominant reason organizations are attracted to lower cost

offshore destinations (e.g., Carmel et al., 2009; Dedrick et al., 2011; Lacity et al., 2009; Schmeisser, 2013; Wiener et al., 2010)Other drivers for sourcing IT and BP related services through an offshore model include, access to expertise/skills of global suppliers, business or process

performance improvements, enhancing service levels, warding off competitive pressures, improving flexibility and scalability, achieving faster delivery ofIT and BP related services, and access to new markets in offshore destinations (e.g., Carmel and Tjia, 2005; Currie et al., 2008; Kaiser and Hawk, 2004;Lacity et al., 2009; Rao et al., 2006)

Recent work also highlights that organizations are increasingly engaging in offshoring for core activities such as innovation and the organizationalfocus is less on short-term cost savings (Lacity and Willcocks, 2013; Nieto and Rodrı́guez, 2011)

Organizational motives to achieve scalable operations and improve time-for-delivery of services have been particularly more prominent in studiesfocusing on BP related decisions (Lacity et al., 2011)

Potential increases in the transaction costs related to finding, evaluating, and managing offshore suppliers may discourage firms from offshoring(Lacity and Rottman, 2008; Smith and McKeen, 2004) Similarly, a potential increase in business risks (Smith and McKeen, 2004), concern for datasecurity and protecting intellectual property (Gokhale, 2007), and a relatively high degree of interdependence among tasks (Mirani, 2007), havebeen reported to be negatively related to the decision to offshore

Recent studies highlight the dynamics of offshoring related decision making. For example, while initial offshoring decisions may have been madebased on cost, subsequent decisions may be guided more from a capabilities perspective based on a critical mass of resources, capabilities, andrelationships built during earlier offshoring initiatives (Dedrick et al., 2011)

Organizational outcomes of offshoringFindings related to organizational success with offshoring efforts are mixed. Some studies hint that firms do accrue the desired benefits that led them

to offshore (Gokhale, 2007). There is also indirect evidence that offshore software development organized within a 24 h knowledge factoryparadigm is similar to collocated development in terms of quality and efficiency metrics (Gupta et al., 2009). Studies also report a positiverelationship between offshoring and firms’ export performance. This relationship is stronger for those firms with export experience (Bertrand,2011; Schmeisser, 2013)

Other studies suggest that organizations often do not realize desired benefits from offshoring due to underestimation of hidden costs given thecomplexity involved in offshoring related decision making (Larsen et al., 2012). One study based on public announcements related to offshoringactivities of the sample firms could not find any clear evidence between the extent of offshoring and firm performance (Bhalla et al., 2008)

Studies also report that rather than reducing costs, offshoring often leads to increases in production and transaction costs (Dibbern et al., 2008; Kingand Torkzadeh, 2008; Rottman and Lacity, 2008)

Challenges and risks particular to offshoringAlong with risks and challenges associated with Outsourcing in general (e.g., hidden costs, supplier lock-in, difficulties in performance measurement/

monitoring, opportunistic behavior, communication problems, and differences in organizational cultures), literature indicates three sets of factorsrelated to socio-political risks, national culture differences, and negative impact on client image are especially related to offshoring (e.g., Iacovouand Nakatsu, 2008; Sakthivel, 2007)

Some risks and challenges such as difficulties in knowledge transfer, time-zone differences, data security, and intellectual property protection becomemore severe in the offshore context (Goodman and Ramer, 2007; Gupta et al., 2007; Iacovou and Nakatsu, 2008)

Similarly, both the nature of vendor controls and the dynamics of controls during offshored development projects contain idiosyncrasies particular tooffshoring (Choudhury and Sabherwal, 2003; Gregory et al., 2013). Offshoring success is also known to depend on the crucial roles of boundaryspanners (individuals facilitating communication and collaboration across onshore and offshore sites). Recent work highlights that beyondsimplistic views of boundary spanners, the notion of cultural hybridity, which acknowledges that boundaries can be contested, negotiated, andreconfigured rather than just spanned or bridged is more fruitful in managing offshoring initiatives (Abbott et al., 2013)

As organizations learn from past offshoring experiences and as offshoring experience accumulates within the overall environment, firms becomeincreasingly tolerant to riskier locations for offshoring in the longer term (Hahn et al., 2009). Factors such as communication problems and culturaldifferences may interact with other elements in the offshore context and can significantly erode the possible cost related benefits (Dibbern et al.,2008)

Captive offshoringOverall, literature suggests that firms engage in captive offshoring arrangements primarily to maintain internal control, protect intellectual property,

reduce the exposure of core competencies to third-party suppliers, access qualified personnel, and increase access to new markets (Carmel andTjia, 2005; Kotlarsky and Oshri, 2008; Oshri and van Uhm, 2012). At the same time, firms have been reported to face significant challenges ofincreasing costs, high levels of employee attrition, and lack of integration with the firm’s overall global strategy (Oshri et al., 2009)

Tambe and Hitt (2012) provide some indication of the impact of offshoring on onshore IT workforce. Firms with offshore IT captive centers have 8%less of their onshore IT workforce involved in tradable occupations (those job functions conducive to being offshored) and those without offshorecaptive centers have increased the proportion of onshore employment in these same occupations by 3% (Tambe and Hitt, 2012)

Debate over offshoringOffshoring and its socio-economic impacts has been a subject of much debate across academic disciplines (Bertrand, 2011; Gupta and Sao, 2009;

Mankiw and Swagel, 2006; Thelen et al., 2010; Vardi, 2010; Venkatraman, 2004). Macro-economic studies consistently suggest that whileoffshoring negatively impacts those workers directly displaced by offshoring, the net macro-economic effect is positive for both onshore andoffshore economies (recent example, Wright, 2014). Such findings, of course, have also been a matter of contention (Levy, 2005)

Further, public opinion, consumer sentiment, political rhetoric and activism, and media portrayals tend to significantly diverge from the economicpoint of view (e.g., Grappi et al., 2013; Hoffman, 2010)

Within the IS discipline, scholarly opinions (some more sympathetic to the plight of displaced onshore workers than others) seem to converge on twomajor themes. First, offshoring of IT work is an inevitable part of continued globalization. Second, onshore workers, sympathetic organizations,academic programs, and professionals must adapt by focusing on education, re-skilling, innovation, and awareness of a globally competitive labormarket (Beulen, 2010; Gupta, 2010; Hirschheim and Newman, 2010; King, 2005; Vardi, 2010; Venkatraman, 2004)

192 S.A. Khan, M.C. Lacity / Journal of Strategic Information Systems 23 (2014) 190–209

S.A. Khan, M.C. Lacity / Journal of Strategic Information Systems 23 (2014) 190–209 193

2. Theoretical framework

We employed Oliver’s (1991) framework that integrates institutional and resource dependence theories to demonstratehow organizational responsiveness to institutional pressures may vary from passive conformity to active resistance. Oliver(1991) suggests that the level of organizational responsiveness depends on the nature of the institutional pressures them-selves (Oliver, 1991). She describes five predictive dimensions: cause, constituents, content, control, and context as affectingorganizational responses.

We posit that the level of organizational responsiveness to anti-offshoring institutional pressures will depend on five fac-tors corresponding to Oliver’s (1991) five predictive dimensions (see Fig. 1). In order to explicitly account for organizationalstrategic considerations, we incorporate organizational success with offshoring as a sixth predictor. We argue that the extentof benefits organizations derive from offshoring will play a role in whether they heed the calls to curb their offshore engage-ments. Offshoring success is also posited to moderate the effects of all five institutional factors. We describe Oliver’s (1991)predictive dimensions, our variables, and the ensuing hypotheses next. Fig. 1 summarizes the hypothesized relationships.

2.1. Social legitimacy and organizational responsiveness

The cause of the institutional pressures refers to the underlying rationale behind them. One of the intended objectives thatlead institutional stakeholders to exert pressures on organizations is to make them more socially accountable (Oliver, 1991).Organizational responsiveness to institutional pressures will depend on the degree to which an organization agrees withsuch objectives (Oliver, 1991). Thus, when an organization anticipates that conformity will enhance its social legitimacy(that is, it would be viewed as more socially responsible or accountable), acquiescence to institutional expectations willbe the most probable response (Oliver, 1991). This line of reasoning is consistent with Suchman’s (1995) arguments thatorganizations conform to their environments to obtain either or both pragmatic or moral legitimacy and can be understoodbased on both a strategic view of instrumentally managing legitimacy (Pfeffer and Salancik, 1978) and the institutional viewof obtaining legitimacy as the essence of conformity to institutional processes (DiMaggio and Powell, 1983; Suchman, 1995).

Underlying anti-offshoring pressures seems to be a set of normative beliefs based on the rationale that organizationsshould play a more active role in reducing the overall level of unemployment instead of exacerbating it by moving jobs off-shore (Thelen et al., 2010; Venkatraman, 2004). To the extent that organizational actors perceive that not engaging in offsh-oring or reducing the current extent of offshoring will help enhance the organization’s social legitimacy in the eyes ofinstitutional stakeholders, they are more likely to conform. That is, if an organization believes that it will be viewed associally responsible and as ‘‘doing the right thing’’ by ‘‘not sending jobs overseas’’ it is likely to lean toward conformity.On the other hand when organizations are skeptical about the social legitimacy or strategic utility of conformity, they aremore likely to resist (Oliver, 1991). Accordingly, we hypothesize the following:

Fig. 1. Hypothesized relationships.

194 S.A. Khan, M.C. Lacity / Journal of Strategic Information Systems 23 (2014) 190–209

Hypothesis 1. The greater the degree of social legitimacy perceived to be attainable from conformity to anti-offshoringinstitutional pressures, the greater the organizational responsiveness.

2.2. Dependence on Governments and organizational responsiveness

Aspects related to the institutional constituents may also impact the level of organizational responsiveness to institutionalpressures. One such aspect is the dependence of organizations on pressuring constituents (Oliver, 1991). Organizations willbe less likely to resist external pressures when they are dependent on the sources of these pressures (Pache and Santos,2010). In the context of this study, one of the most important institutional stakeholders is the Government. Governmentand government policies enacted through legislation have control over critical resources that shape firms’ competitive envi-ronments (Hillman and Hitt, 1999). As a result there is substantial interdependence between a firm’s economic or compet-itive environment and public policy (Hillman and Hitt, 1999). Further, government decision makers have the ability to alterthe size and structure of markets, to affect the demand of products and services, and to alter the cost structure of firmsthrough various types of legislation (Hillman and Hitt, 1999). Governments have power to channel valuable resourcestoward or away from a firm and to use multiple ‘‘carrots and sticks’’ (e.g. tax, data privacy/security, and labor laws) to pres-sure firms (Kassinis and Vafeas, 2006).

Thus, to the extent organizations are highly dependent on Governments they are less like to resist demands for reducedoffshoring or fulfillment of government contracts using domestic labor as opposed to offshore labor. When dependence islow, more resistant strategies represent minimal risks to organizational interests because the organization is no longer heldcaptive by its dependence (Oliver, 1991; Pache and Santos, 2010). This leads to the following hypothesis:

Hypothesis 2. The greater the degree of organizational dependence on Governments, the greater the organizationalresponsiveness.

2.3. Organizational plans for offshore portfolio and organizational responsiveness

The content of institutional pressures is also relevant. Specifically, it is the consistency or congruence of institutionalexpectations with organizational goals and policies (Goodstein, 1994; Pache and Santos, 2010). Organizations will be moreresponsive to institutional expectations when such expectations are compatible with internal goals and plans and less likelyto be responsive when internal logics of production and technical considerations are at odds with institutional expectations.In such instances institutional expectations may be precluded by organizational goals and policies that give greater weight totechnical and/or economic standards against which performance of most organizations is primarily assessed (Ingram andSimons, 1995; Oliver, 1991).

Organizational plans for offshore portfolio (that is, plans to increase, maintain, or decrease offshore headcount) may beshaped with respect to a variety of internal considerations. For example, offshoring may have direct implications for an orga-nization’s innovation and export performance (Bertrand, 2011; Nieto and Rodrı́guez, 2011) and too much or too little out-sourcing may have differential impacts on organizations’ market performance (Kotabe et al., 2012). Similarly,organizations may choose to reduce or eliminate offshore engagements simply because there is no more need or becausethere are other technical and economic considerations. These include, lack of desired cost savings, problems with more thanexpected extra costs, time zone challenges, high turnover in offshore locations, and problems associated with knowledgetransfer, among others (Dibbern et al., 2008; Iacovou and Nakatsu, 2008; King and Torkzadeh, 2008). To the extent organi-zations plan to increase their overall offshore portfolio based on their internal logics, such plans will be at odds with anti-offshoring pressures. On the other hand if organizational plans are to decrease overall offshore portfolios then institutionalexpectations are in line with organizational goals—leading to greater responsiveness (cf., Goodstein, 1994; Oliver, 1991). Thissuggests the following hypothesis:

Hypothesis 3. Organizations that plan to increase their offshore portfolio will be less responsive to anti-offshoring pressuresthan organizations that plan to maintain or reduce their offshore portfolio.

2.4. Complying actions of other firms and organizational responsiveness

Institutional control refers to the mechanisms through which pressures are imposed on organizations. One mechanism isthe extent of voluntary diffusion of institutionally sanctioned norms. As organizations adopt norms or practices they becomemodels for other organizations in an organizational field. In turn, the norms and practices become increasingly legitimated(Goodstein, 1994). Overall, the more broadly diffused an institutional expectation or practice has become, the greater thelikelihood that organizations will conform (Oliver, 1991).

However, it is important to note that such voluntary diffusion of norms is often mediated by the organization’s immediatesocial structural context in terms of social network ties (Westpahl and Zajac, 2001). In responding to external pressures,senior managers are often influenced by information obtained from leaders of other firms in their network (cf., Westpahl

S.A. Khan, M.C. Lacity / Journal of Strategic Information Systems 23 (2014) 190–209 195

and Zajac, 2001). In other words, for senior managers, a more nuanced indication of an impending drift away from offshoring,if any, may come from leaders of other firms in their social network. Prior research supports this line of reasoning. For exam-ple, Davis (1991) demonstrated how direct communication between managers across firms provided a mechanism of vicar-ious learning for focal firms with respect to the potential benefits and drawbacks of adopting ‘‘poison pills’’ as a takeoverdefense. Similarly, Westpahl and Zajac (2001) found that the likelihood of a focal firm decoupling stock buyback programsfrom actual practice increased when other firms in its network had also done so.

Thus, to the extent that senior managers from the focal firm believe that senior managers at other firms in their networkare moving away from offshoring (complying actions of other firms), the focal firm is likely to follow suit. This notion is inline with both a network embeddedness perspective (Westpahl and Zajac, 2001) and a mimetic processes view in whichadministrators under uncertainty regarding the appropriate response will draw on and heed to what others are doing(DiMaggio and Powell, 1983; Mignerat and Rivard, 2009). This leads to the following hypothesis:

Hypothesis 4. The greater the extent to which senior managers at a focal firm believe that senior managers at other firms arecurbing or eliminating offshoring, the greater the organizational responsiveness.

2.5. Regulatory environment uncertainty and organizational responsiveness

The environmental context within which pressures are exerted also determines organizational responsiveness. Onedimension of the context is environmental uncertainty (Oliver, 1991). Theorists have long argued that decision makerswithin organizations have strong preferences for certainty, stability, and predictability in organizational life (DiMaggio,1988; Pfeffer and Salancik, 1978). Oliver (1991) suggests that when the environmental context of institutional influenceis highly uncertain and unpredictable, organizations will be more responsive to institutional expectations in order to rees-tablish control and stability over future organizational outcomes.

In this study, we focus on Regulatory Environment Uncertainty or the degree to which senior managers perceive govern-ment regulatory actions with respect to offshoring as unpredictable. Managers attempt to insulate their organizations fromunpredictable shifts in the regulatory environment so as to diminish the organization’s vulnerability to conditions which arepoorly understood (Milliken, 1987). When managers perceive greater uncertainty in terms of future regulatory actions thatcould affect offshoring they are more likely to err in favor of stability and control over their sourcing portfolio and eliminateor reduce the extent of offshoring (cf., Milliken, 1987), for example, by considering more domestic sourcing options vis-à-visoffshoring. On the other hand, when perceived regulatory environment uncertainty is low, managers are likely to view offsh-oring as less risky. Accordingly, we hypothesize:

Hypothesis 5. The lower the level of uncertainty in regulatory actions of Government(s) with respect to offshoring, thelower the organizational responsiveness.

2.6. Organizational offshoring success and organizational responsiveness

Oliver’s (1991) framework acknowledges that the level of responsiveness surrounds both the willingness and ability oforganizations to conform (Goodstein, 1994; Oliver, 1991). In this sense, along with institutional considerations an organiza-tion’s (internal) strategic imperatives also become crucial ingredients in how organizations respond to institutional expec-tations (Pache and Santos, 2010). These ideas depict the role of active agency as it comes into play when organizationsconsider their responses to institutional pressures (Seo and Creed, 2002). However, it is unclear how active agency surfaceswhen organizational strategic actions become the subject of institutional pressures. More precisely, it is unclear how activeagency manifests itself when (1) the very actions toward attainment of certain strategic goals become the subject of counterinstitutional pressures, and (2) there is variation in the outcomes of such strategic actions which may have implications forthe organization itself.

IT and BP offshoring provide a fertile context for the evaluation of such a role of active agency. Research indicates thatoffshoring has become a major strategic concern for organizations and has evolved beyond the dominant logic of labor arbi-trage (Bertrand, 2011; Lewin et al., 2009; Nieto and Rodrı́guez, 2011). While strategic motives may be driving companies tooffshore, scholars have also reported substantial variation in the outcomes of such strategic endeavors (Dibbern et al., 2008;Lewin et al., 2009; Rottman and Lacity, 2006). We suggest that variation in outcomes of past strategic offshoring efforts willalso play a role in how organizations respond to anti-offshoring pressures. Specifically, we contend that past offshoring suc-cess will both have a direct effect on organizational responsiveness and also moderate the effects of the five institutionalfactors. We specify the related hypotheses next.

As noted earlier, a variety of firm level and environmental conditions have reportedly driven firms to consider offshoring.Managers have long been required to contain costs, ramp up projects quickly, find qualified and experienced personnel infast moving technologies, and to innovate constantly (Carmel and Agarwal, 2002; Lewin et al., 2009). However, research sug-gests that realizing expected benefits in an offshore context is not easy (Rottman and Lacity, 2006) and many firms fail torealize the desired benefits from offshoring (e.g., Dibbern et al., 2008).Thus, to the extent the strategic drivers of offshoringremain relevant for firms and managers believe that they have been successful in achieving the strategic benefits through

196 S.A. Khan, M.C. Lacity / Journal of Strategic Information Systems 23 (2014) 190–209

their current offshoring efforts they are more likely to continue offshoring. As a result they are also less likely to be respon-sive to anti-offshoring institutional pressures. These arguments lead to the following hypothesis:

Hypothesis 6. The greater the level of organizational offshoring success, the lower the organizational responsiveness.

In addition to this direct effect, we expect that the level of organizational offshoring success will strengthen the effects ofthose institutional factors which lower responsiveness and at the same time weaken the effects of those factors whichincrease organizational responsiveness. Theory suggests that to the extent conformity to institutional pressures is perceivedto conflict with organizational goals, or internal logics and functional means, organizations will be more likely to resist suchpressures (Oliver, 1991; Pache and Santos, 2010). Such inconsistency reflects organizational interests and strategic motivesto be at odds with institutional expectations and provokes organizational doubts about the validity or legitimacy of institu-tional expectations (Oliver, 1991). That is, the likelihood that organizations will conform or resist to institutional pressures isnot exclusively dependent on the five institutional factors identified above (Hypotheses 1–5) but also in interaction with thediscrepancy between institutional expectations and organizational strategic motives (cf., Oliver, 1991). Given the significantchallenges with offshoring (e.g., Carmel and Tjia, 2005; Rottman and Lacity, 2006) those firms which did achieve some levelof offshoring success will be less responsive despite the institutional pressures against offshoring. These considerations leadto the following five moderation hypotheses:

Hypotheses 7a–7e. The level of organizational offshoring success moderates the relationships specified in Hypotheses 1–5,such that:

– The positive relationships (H1, H2, H4, and H5) are less positive for those who report high, as opposed to low, offshoringsuccess

– The negative relationship (Hypothesis 3) is more negative for those who report high, as opposed to low, offshoringsuccess.

3. Method

3.1. Data collection approach and target respondents

Oliver (1991) suggests that research investigating responsiveness may need to include perceptual measures of several ofthe proposed variables. Also, to our knowledge, there are currently no available archival data at the organizational level per-taining to this study. Hence, we chose the questionnaire survey approach. Scholars suggest that in the absence of archivaldata, self-reported measures are acceptable at the organizational unit of analysis provided data is obtained from key respon-dents (King and Sabherwal, 1992).

However, accurate identification of key individuals knowledgeable about sourcing activities at each firm across a randomsample of organizations proved to be challenge. Gartner Research (Karamouzis, 2011) reports that a variety of constituentsmay be responsible for the planning and execution of sourcing initiatives within an organization. To overcome this challengeand in light of difficulties in obtaining sensitive data from busy executives, we sought help from Everest Group to provide uswith access to sourcing executives. Everest Group is a reputable and fairly large advisory firm providing research and consult-ing services to buyers and providers of global sourcing. Its clients include Global 1000 firms across all industry categories.4

The Managing Partner for Research at Everest Group championed our research efforts and sent our survey to subscribers of Ever-est Group’s active industry research output related to global sourcing of business and IT services. The subscribers representmostly large organizations from across the world currently engaged in substantial offshore arrangements both via captiveand third-party provider models. The subscribers are at various levels within these organizations, ranging from C-level execu-tives to project managers. This was an ideal pool of potential respondents for study purposes, access to which was otherwisevery difficult. Other studies have drawn on similar industry organizations to gain access to pertinent data (e.g., Chee-Wee et al.,2013).

The survey instrument was iteratively refined based on input from two academics and representatives of Everest Group,and pre-tests with three executives. We also drew on established measures with demonstrated reliability and validity whenpossible. The refined questionnaire was administered via the Web by Everest Group. In the first wave of data collection, theresearch firm sent emails with a link to online survey to about half the subscribers. Three reminder emails were sent to thisset one week apart from each other. This resulted in 44 responses. The research firm then sent emails to the second half oftheir subscribers list. A reminder email, one week later, was also sent to this second list. The number of responses receivedfrom the second set of emails was 18. To increase the number of responses, we sent individual emails to approximately 550subscribers. This resulted in another 38 responses. Finally, we contacted approximately 30 executives at firms within ourregion requesting participation. This effort resulted in another 10 responses.

4 Everest Group Website, About Us section: available online at http://www.everestgrp.com/about-us/ (accessed February 24.02.12).

S.A. Khan, M.C. Lacity / Journal of Strategic Information Systems 23 (2014) 190–209 197

Given that responses were obtained from four different modes of contact (two separate mass emails and two separatepersonal outreach efforts) as described above, we compared these four groups using Analysis of Variance (ANOVA) ontwo variables. ANOVA tests for Total Firm Revenue, F (3,75) = .90, p > .05, and for Total Number of Employees F(3,79) = .69, p > .05 both indicated that there were no significant differences between the four groups on these variables.Thus, we combined all sets of respondents.

In order to assess the representativeness of the sample, we compared 40 of the known firms in this study (i.e. those firmswhose names could be identified based on respondent information) with the Fortune Global 500 list of companies.5 Indepen-dent samples t-test in terms of Revenues suggested no significant difference t (538) = 1.176, p = 0.240. Additionally, we comparedthe 40 known firms with the remaining 44 firms in our study, on all the study variables. ANOVA tests revealed no significant dif-ferences. We also compared the first 1/3 with the last 1/3 of the respondents to approximate any differences between respon-dents and non-respondents (King and Sabherwal, 1992). ANOVA tests for Total Firm Revenue, F (1,53) = 1.68, p > 0.05 and forTotal Number of Employees, F (1,55) = 2.13, p > 0.05, both indicated that there were no significant differences. Finally, we care-fully checked whether the data meet the assumptions of our analytic approach as described below. We evaluated the analysesresults for apparent signs of sample size issues such as over-inflated beta coefficients (Garson, 2013) as we could not calculatepower, apriori, given complete lack of known effect sizes relevant to our study. In sum, given a strong theoretical model and theseries of design and analytic steps taken we deemed the data both reasonably representative and adequate.

Sample Characteristics: Table 2 provides demographic characteristics of firms in the sample. Overall, 49 out of 84 respon-dents provided a contact email for receiving a copy of survey results. The firms are mostly large multinational organizationsheadquartered in nine different countries and represent a diverse array of industries.

3.2. Measures

Unless otherwise noted, survey items were anchored on a 7-point Likert-type response scale where a 1 indicates ‘‘StronglyDisagree’’, a 4 indicates ‘‘Neither Disagree nor Agree’’, and a 7 indicates ‘‘Strongly Agree’’.

Organizational responsiveness to anti-offshoring institutional pressures (Organizational Responsiveness): The dependent var-iable in this study is geared toward capturing organizational responsiveness within the context of organizations’ IT and BPoffshoring initiatives. Given this purpose, our attempt was to assess whether organizations were heeding to calls for a reduc-tion in overall offshoring and doing so specifically as a result of broader anti-offshoring pressures. Due to a lack of archivaldata we included direct questions that assess the degree to which organizational actions depict such responsiveness (pleasesee Table 3). Items assessed overall responsiveness, responsiveness in terms of IT offshoring and BP offshoring, and overallmoves toward avoiding new offshoring contracts.

Expectations of Increase in Social legitimacy: This variable was assessed by a direct question based on Oliver’s (1991) sug-gestions that senior managers may be asked about ‘‘whether they expect compliance to increase their organization’s statusor prestige (p. 172).’’ Given the study context we included an item referring to the organizational expectations of increase inimage as a socially responsible organization. ‘‘We expect that our image as a socially responsible organization will be enhanced ifwe lower our overall extent of offshoring.’’

Dependence on Federal and State Governments: In creating this measure, we followed a traditional approach used in thecorporate political activity literature (Hillman et al., 2004) that focuses on the percentage of revenues coming from govern-ments as an indicator of a focal organization’s dependence on government. The item was: ‘‘A fairly significant portion of ourorganization’s total sales (revenues) comes from Federal and/or State Government(s) as customers.’’

Organizational plans for offshore portfolio: Toward the beginning of the survey, respondents were asked to indicate howtheir overall offshoring portfolio (in terms of Full-time Equivalent—FTE workers) was going to change in the next three years.Response categories ranged from ‘‘Decrease by more than 2500 FTE’’ to ‘‘No Change’’ to ‘‘Increase by more than 2500 FTE’’.Using this data, we created a dummy variable as follows. Those who indicated plans to increase the offshore head-countwere coded as ‘‘1’’ and those who indicated no change or a decrease in offshore head-count were coded as ‘‘0’’.

Complying actions of other firms: This variable was assessed in a manner similar to the dependent variable except that thereferents for these actions were executives at other firms in the network of the focal firm’s executive. We used a direct ques-tion for this variable: ‘‘I know of executives at other firms who have responded to anti-offshoring pressures by reducing or plan-ning to reduce the overall extent of offshore delivery.’’

Regulatory environment uncertainty with respect to offshoring: Our conceptualization of regulatory environment uncer-tainty is in line with Milliken’s (1987) state uncertainty or the extent to which organizational actors ‘‘perceive the organi-zational environment or a particular component of that environment, to be unpredictable (p. 136, emphasis added).’’ Wedrew on the Miles and Snow (1978) perceived environmental uncertainty scale as the building block. The scale requiresrespondents to rate the specific characteristics or behaviors pertaining to environmental components such as governmentregulatory bodies, in terms of their predictability. The anchors include 1: Highly Predictable and 7: Highly Unpredictable.We adapted the items to reflect the offshoring context, and focused on the regulatory environment. The items capture,the degree of predictability of changes in overall tax laws or agency policies, data privacy/security laws, intellectual propertyprotection laws, hiring of foreign workers, and conditions surrounding fulfillment of state and federal contracts (see Table 3).

5 Fortune Magazine, Global 500 List, Year 2011, Available online at: http://money.cnn.com/magazines/fortune/global500/2010/full_list/ (retrieved 22.03.13).

Table 2Demographic characteristics of the sample (n = 84).

Revenues

Category %

Lower than US$250 million 6.3US$250 million to 1 billion 5.1US$1–5 billion 22.8US$5–10 billion 16.5US$10–20 billion 10.1US$20–30 billion 8.9US$30–40 billion 5.1Greater than US$40 billion 25.3

Total 100%

Firms’ headquarter countries

Country %

Australia 1.2Canada 3.6France 4.8Germany 3.6Hong Kong 1.2Netherlands 2.4Switzerland 2.4United Kingdom 10.7United States 70.2

Total 100%

Number of employees

Category %

0–2499 Employees 122500–4999 8.45000–19,999 21.720,000–49,999 20.550,000–100,000 13.3More than 100,000 employees 24.1

Total 100%

Industry

Category %

Aerospace and defense 5.9BFSI: banking, financial services and insurance 27.9Consumer packaged goods 7.4Electronics & hi-tech 8.8Energy & utilities 4.4Healthcare 10.3Manufacturing & industrials 10.3Media & entertainment 2.9Professional services/investment 5.9Public sector (Government, Education, Not-for-profit, etc.) 0.0Retail 2.9Telecom 4.4Transportation 0.0Others 7.1

Total 100%

Self reported respondent involvement in offshoring related decisions

Anchors Information technology offshoring Business process offshoring

1 (Very low involvement) 14.06% 17.24%2 14.06% 10.34%3 7.81% 6.90%4 10.94% 15.52%5 10.94% 15.52%6 10.94% 10.34%

198 S.A. Khan, M.C. Lacity / Journal of Strategic Information Systems 23 (2014) 190–209

Table 2 (continued)

Anchors Information technology offshoring Business process offshoring

7 (Very high involvement) 31.25% 24.14%

Total 100% 100%

Respondent job titles

Category %

C-Level Executive (CEO, CFO, COO, CAO, CIO, CTO, CSO, CKO, etc.) 10.29%Director, Executive VP, Senior VP, Vice President, Controller 48.53%Department or Business Unit Manager 19.12%IT or IS manager 8.82%Other, please specify (included Legal, Purchasing, Sourcing, etc.) 13.24%

Total 100%

Table 3Construct measures and validity assessment.

Construct and items Factorloadingsa

Organizational Responsiveness (Cronbach’s Alpha, a = 0. 874)In response to anti-offshoring pressures, our organization has reduced or plans to reduce the overall extent of offshore delivery 0.785In response to anti-offshoring pressures, our organization is scaling back or putting on hold originally planned growth in offshore

delivery of Information Technology related services0.900

In response to anti-offshoring pressures, our organization is scaling back or putting on hold originally planned growth in offshoredelivery of Business Process related services

0.895

In response to anti-offshoring pressures, our organization has decided to avoid signing longer-term offshore delivery contracts, atleast within the next 12 Months

0.691

Imposed Offshoring Restrictions (a = 0.882)Our organization faces customer imposed restrictions on offshoring 0.670Our organization faces other legal or contractual obligations that impose restrictions on offshoring 0.871Overall, our organization faces imposed restrictions on Information Technology Offshoring 0.841Overall, our organization faces imposed restrictions on Business Process Offshoring 0.864

Regulatory Environment Uncertainty (a = 0. 809) [7 Point Anchors: Highly Predictable to Highly Unpredictable]Changes in tax laws or policies with respect to offshoring are: 0.794Changes in Data Privacy/Security laws or policies that may impact offshoring are: 0.793Changes in laws or policies that restrict offshore fulfillment of Government contracts are 0.732Changes in laws or policies pertaining to hiring of foreign workers (e.g. H1-b visa policies in the US) are: 0.787

Success with Offshoring (a = 0.872)Overall, offshoring has helped us reduce costs 0.657Offshoring has helped us gain increased access to skilled personnel 0.785Offshoring has improved our overall flexibility 0. 832Offshoring has helped us achieve increased speed to market or speed of delivery 0.791We are satisfied with our overall benefits from Information Technology (IT) offshoring 0.755We are satisfied with our overall benefits from Business Process (BP) offshoring 0.689

a Extraction/Rotation Method: Principal Component Analysis/Varimax with Kaiser Normalization. Rotation converged in 5 iterations.

S.A. Khan, M.C. Lacity / Journal of Strategic Information Systems 23 (2014) 190–209 199

Offshoring success: In the interest of gauging overall success with offshoring as opposed to specific offshoring transactions,we drew on the Grover et al. (1996) outsourcing success measure and other studies (e.g., Dibbern et al., 2008) to create a sixitem overall measure of offshoring success. Consistent with Grover et al. (1996), items assessed satisfaction with offshoring(see Table 3).

3.3. Control variables

US Firms vs. others: Some industry reports indicate that the US is the largest market for offshoring and that US firms arelikely to lead the increase in demand for offshore services (Iyengar, 2011a, 2011b). Other reports indicate that there is a slowbut noticeable trend among US and Canadian firms to shy away from offshore engagements (Reynolds, 2011). We created adummy variable indicating whether a firm’s headquarters were within the US (coded as 1) or outside of US (coded as 0).

Captive Operations vs. others: Firms often opt for internal control of offshore operations (captive offshoring) as opposed toor in conjunction with engaging offshore providers (Oshri et al., 2009a). Captive arrangements involve greater investmentsand are typically carried out by larger firms (Carmel and Agarwal 2002). Further, captive operations maybe motivated bycorporate tax benefits accrued for onshore firms when engaging in operations within lower corporate tax offshore

200 S.A. Khan, M.C. Lacity / Journal of Strategic Information Systems 23 (2014) 190–209

destinations (Bradley, 2011). Captive arrangements may be a stronger target for institutional pressures and at the same timemore difficult for firms to disentangle. On the other hand, captive facilities bring high risks such as of attrition of humanassets (Lewin et al., 2009; Oshri and Corbett, 2011). Respondents were asked to indicate the dominant model for their orga-nization’s offshore engagement. Those who indicated predominantly captive or some mix of captive and third party provid-ers were coded as ‘‘1’’ having captive operations and the rest were coded as ‘‘0’’ no captive operations.

Senior Most Respondents vs. others: Senior level respondents may be more aware of larger institutional shifts and theirstrategic implications for their organizations (Sutcliffe, 1994). Thus we statistically controlled for this possible effect. C-levelexecutives or those directly reporting to them (e.g., Director, VP, etc.) were coded as ‘‘1’’ senior respondents and all otherswere coded as ‘‘0’’.

Internal Cost Reduction Pressures: We controlled for organizations’ internal pressures to reduce costs because cost reduc-tion has repeatedly been cited as the top reason organizations offshore (Lacity et al., 2010). Such pressures could explainorganizational responsiveness and may very well counteract any effects from institutional factors. This variable was mea-sured with a direct question: ‘‘Overall, there are pressures from within our organization to reduce costs for Information Technol-ogy (IT) and/or Business Process (BP) related services.’’

Imposed Offshoring Restrictions: Arguably, despite the broader anti-offshoring sentiment, organizations may not directlyfeel the pressures to stop offshoring. On the other hand, those facing directly imposed restrictions on offshoring may be moreresponsive given government or legal mandate. Institutional theorists suggest that legal and government mandate are pow-erful mechanisms of institutional control (Scott, 1995). To control for this important variable we measured directly imposedoffshoring restrictions on organizations coming from four sets of constituents. Four items covered restrictions against offsh-oring imposed by Federal and/or State governments, customers, legal and contractual obligations, and employees/unions.We also included two items covering overall imposed restrictions on IT and BP offshoring (see Table 3).

3.4. Data analyses

Prior to proceeding with hypotheses testing, we assessed the construct validity of offshoring success, organizationalresponsiveness, regulatory environment uncertainty, and imposed offshoring restrictions. We performed Principal Compo-nent Analysis using Varimax rotation with Kaiser Normalization to ensure convergent and discriminant validity among theconstructs (Garson, 2013; Straub et al., 2004). During initial iterations, two items for Imposed Offshoring Restrictions weredropped due to poor (below 0.5) Kaiser–Meyer–Olkin Measure of Sampling Adequacy (MSA). One item related to RegulatoryEnvironment Uncertainty was dropped due to cross-loading. For the final iteration, the overall MSA was 0.71, which exceedsthe suggested threshold of 0.60 for overall MSA (Garson, 2013). The Bartlett’s Test of Sphericity was also significant(p < 0.001). Communalities for all items exceeded the recommended threshold of .50 indicating that the constructs explaingreater than 50% variation in respective items. Overall, the Principal Component Analysis showed four factors, as desired,with Eigen-values greater than 1. The four factors together explained 66.52% of the variance. All items loaded cleanly on theirrespective constructs and there were no further high cross loadings (see Table 3). Cronbach’s Alphas for each of the fourmulti-item constructs were (see Table 3) well above the recommended 0.70 threshold (Garson, 2013). These indicate goodinternal consistency amongst respective items representing each construct (Garson, 2013). Overall, this set of analyses sug-gests that lack of construct validity is not a threat.

We also checked if the data conform to other important assumptions of Multiple Regression. Standardized residuals for allcases were below 2.0, and well below recommended threshold of 3.3, indicating no potential outliers (Garson, 2013). Further,standardized DfBetas for all predictors across all cases were below the recommended cutoff of 2 divided by square root ofsample size (Garson, 2013). We examined the histogram and the Normal P–P Plot of regression standardized residuals(Garson, 2013). Both indicated that the error terms conformed to a normal distribution. Further, the Kolmogorov–Smirnov(0.07,p > .20) and Shapiro–Wilk (0.99,p = .46) tests were both not significant indicating no severe departures from normality.The scatter-plot of standardized regression residuals by the predicted values suggested that Heteroscedasticity was not anissue. The standard deviation of the dependent variable (1.28) was greater than the standard deviation of the residuals (0.78)indicating that non-linearity was not a threat (Garson, 2013). We also examined all partial regression plots and found nosignificant departures from linearity.

To minimize the potential problem of Multicollinearity, we standardized all independent variables (including control vari-ables but excluding dichotomous variables) prior to creating cross-product interaction terms (Dawson and Richter, 2006). Toassess this threat after running the regressions, we examined the Tolerance and Variance Inflation Factors (VIFs) for all vari-ables. All tolerance values were well above 0.2 and all VIF values were well below 4.0 (Garson, 2013). Further, all ConditionIndex scores were below 15. All these indicate that multicollinearity was not a threat for these analyses (Garson, 2013).

In order to minimize the threat of possible common method variance, we took the following steps. First, as noted above,reliability and validity of measures were assessed to ensure common method variance was not strong enough to confoundmeasurement (Julian et al., 2008). Second, in order to ease the respondents’ concern of leaking critical business information,they were assured that the survey is completely anonymous and only summarized results will be reported. Third, to providea reference of the degree of common method variance in the study, we conducted Harman’s one-factor test using one prin-cipal components analysis. This obtained an 18 factor solution with Eigen-values greater than 1, accounting for 80% of thevariance. The first factor accounted for only 7.4% of the total variance. Given no single factor accounted for the majority of thevariance we had grounds for assuming that common method variance is not responsible for study results (Julian et al., 2008).

S.A. Khan, M.C. Lacity / Journal of Strategic Information Systems 23 (2014) 190–209 201

3.5. Hypotheses tests

We conducted moderated hierarchical linear regressions with ordinary least squares method (using IBM SPSS Statisticsv.19) to test hypotheses. We first entered the five control variables to provide a baseline model (Model 1). We next enteredthe five (Hypotheses 1–5) independent variables in Model 2, followed by the moderator variable (Hypothesis 6) in Model 3.Models 4–8 incorporate the five interaction terms.

4. Results

Table 4 provides means, standard deviations, and Pearson correlations at the measure level for all variables in the anal-yses. Table 5 provides the regression results for organizational responsiveness to anti-offshoring institutional pressures.Table 6 summarizes the results of hypotheses testing. Prior to presenting results of hypotheses testing, a note on the controlvariables is warranted here. As Model 1 in Table 5 indicates, when viewed in isolation of other study variables, imposedoffshoring restrictions had a positive and significant effect on organizational responsiveness. However, this effect becamenon-existent in other models. Internal cost reduction pressures had no effect across models. In general, those firms with cap-tive operations were less responsive than firms without captive operations. Similarly, those firms headquartered in the USwere less responsive than the rest of responding firms. Also, senior most respondents indicated more responsiveness thanothers. We present the results of hypotheses testing next.

As Model 2 in Table 5 indicates, the effect of social legitimacy on responsiveness is significant and positive (b = .36,p < .001) suggesting that organizational expectations for an enhancement in their image as a socially responsible organiza-tion are likely to result in their willingness to reduce the overall extent of offshoring. Hypothesis 1 was supported. The coef-ficient for dependence in Model 2 is not significant (b = �.09, p > .05). Hypothesis 2 was not supported. Model 2 indicatesthat the effect of organizational plans to offshore portfolio was negative and significant (b = �.20, p < .05) suggesting thatthose organizations with goals to increase their offshore headcounts in the next three years showed lower levels of respon-siveness as compared to those whose goals included lowering or maintaining their offshore headcounts. Hypothesis 3 wassupported.

Hypothesis 4 stated that the greater the extent to which managers at a focal firm believe that executives at other firms arelowering their offshore engagements, the greater will be their responsiveness. Model 2 shows that the effect of complyingactions of other firms is significant and positive (b = .39, p < .001). Hypothesis 4 was supported. Hypothesis 5 stated that thegreater the level of regulatory environment uncertainty the greater will be organizational responsiveness. The coefficient forregulatory environment uncertainty in Model 2 is significant but the sign is negative (b = �.24, p < .05) as opposed to thehypothesized positive effect. This indicates that organizations are instead less responsive when the executives perceivegreater levels of uncertainty in regulations pertaining to the future of offshoring. Hypothesis 5 was not supported.

Hypothesis 6 stated that the greater the level of organizational offshoring success, the lower the organizationalresponsiveness. As Model 3 indicates, upon entering the offshoring success term, there was no significant increase in R2 fromModel 2 to 3 (DR2 = .01; F Change = 1.98, p > .05). The coefficient for offshoring success in Model 3 was not significant(b = .13, p > .05). Thus, Hypothesis 6 was not supported.

Table 4Means, standard deviations (s.d.), and correlations.

Variable Mean S.D. 1 2 3 4 5 6 7 8 9 10 11

1. US firm or not 0.70 0.462. Captive operations or not 0.29 0.45 �0.173. Senior most respondents or

not0.59 0.49 0.15 �0.22

4. Internal cost reductionpressures

6.05 1.34 0.02 0.03 �0.02

5. Imposed offshoringrestrictions

3.27 1.49 �0.06 0.07 0.01 0.07

6. Social legitimacy 3.53 1.51 �0.05 0.02 �0.12 0.02 0.47**

7. Dependence onGovernment

3.28 1.93 0.05 0.06 0.08 �0.05 0.43** 0.29*

8. Org. plans for offshoreportfolio

0.73 0.14 0.15 0.20 0.19 �0.16 0.03 �0.12 �0.07

9. Complying actions of otherfirms

3.64 1.71 �0.02 0.04 0.03 0.02 0.30* 0.33* 0.33* �0.24

10. Regulatory environmentuncertainty

4.51 1.09 �0.09 �0.12 0.28* �0.01 0.18 0.20 0.08 �0.06 0.28*

11. Offshoring success 5.11 1.05 0.04 0.15 0.01 0.03 0.06 �0.24 0.08 0.14 �0.15 �0.0512. Responsiveness 2.87 1.21 �0.13 �0.18 0.12 0.15 0.27* 0.47** 0.15 �0.34** 0.50** 0.04 �0.06

Two-tailed tests.* p < .05.** p < .01.

Table 5Results of moderated hierarchical regression analyses for organizational responsiveness.

Independent variables Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8

US firms vs. others �.17 �.16 �.17 �.18* �.18* �.18* �.18* �.22*

Captive operations vs. others �.20 �.17 �.19* �.20* �.20* �.19* �.20* �.21*

Senior most respondents vs. others .09 .22* .23* .24** .25** .26** .26** .24**

Internal cost reduction pressures .13 .10 .09 .09 .06 .06 .05 .08Imposed offshoring restrictions .23* .07 .05 .01 .03 .04 .05 .09Social legitimacy .36*** .39*** .43*** .39*** .39*** .38*** .37***

Dependence on Government �.09 �.10 �.07 �.10 �.11 �.13 �.12Org. plans for offshore portfolio �.20* �.21* �.24** �.23* �.24** �.25** �.22*

Complying actions of other firms .39*** .40*** .42*** .48*** .48*** .49*** .49***

Regulatory environment uncertainty �.24* �.24* �.23* �.25** �.25** �.26** �.28**

Offshoring success .13 .15 .16 .24 .25 .19Social legitimacy � success �.20* �.22* �.22* �.21* �.20*

Dependence on Govt. � success .17 .16 .19 .21Org. plans for offshore portfolio � success �.10 �.11 �.08Complying actions of other firms � success �.05 .01Regulatory env. uncertainty � success �.19*

Intercept 3.19 3.38 3.41 3.44 3.39 3.41 3.41 3.45R2 .14 .48 .50 .53 .55 .56 .56 .58Adjusted R2 .09 .41 .42 .45 .47 .47 .46 .48R2Change (DR2) .14 .35 .01 .03 .02 .00 .00 .03Model F 2.52* 6.85*** 6.49*** 6.72*** 6.68*** 6.18*** 5.72*** 5.86***

F change 2.52* 9.76*** 1.98 5.16* 3.44 .44 .20 4.10*

Standardized regression coefficients are reported. n = 84.* p < .05.** p < .01.*** p < .001.

Table 6Summary of hypotheses testing results.

Hypothesis Result

Hypothesis 1: The greater the degree of social legitimacy perceived to be attainable from conformity to anti-offshoringinstitutional pressures, the greater the organizational responsiveness

Supported

Hypothesis 2: The greater the degree of organizational dependence on Governments, the greater the organizationalresponsiveness

Not supported

Hypothesis 3: Organizations that plan to increase their offshore portfolio will be less responsive to anti-offshoring pressuresthan organizations that plan to maintain or reduce their offshore portfolio

Supported

Hypothesis 4: The greater the extent to which senior managers at a focal firm believe that senior managers at other firms arecurbing or eliminating offshoring, the greater the organizational responsiveness

Supported

Hypothesis 5: The lower the level of uncertainty in regulatory actions of Government(s) with respect to offshoring, the lowerthe organizational responsiveness

Not supported(reversed)

Hypothesis 6: The greater the level of organizational offshoring success, the lower the organizational responsiveness Not supportedHypothesis 7a: The level of organizational success with offshoring moderates the relationship between the degree of social

legitimacy perceived to be attainable from conformity to anti-offshoring institutional pressures and organizationalresponsiveness (H1): the relationship is less positive for those who report high, as opposed to low, success with offshoring

Supported

Hypothesis 7b: The level of organizational success with offshoring moderates the relationship between the degree ofdependence Governments and organizational responsiveness (H2): the relationship is less positive for those who reporthigh, as opposed to low, success with offshoring

Not supported

Hypothesis 7c: The level of organizational success with offshoring moderates the relationship between organizational plansfor offshore portfolio and organizational responsiveness (H3): the relationship is more negative for those who report high,as opposed to low, success with offshoring

Not supported

Hypothesis 7d: The level of organizational success with offshoring moderates the relationship between the extent to whichsenior managers at a focal firm believe that executives at other firms are curbing or eliminating offshoring andorganizational responsiveness (H4): the relationship is less positive for those who report high, as opposed to low, successwith offshoring

Not supported

Hypothesis 7e: The level of organizational success with offshoring moderates the relationship between level of uncertainty inregulatory actions of Federal and State Government(s) with respect to offshoring and organizational responsiveness (H5):the relationship is less positive for those who report high, as opposed to low, success with offshoring

Supported

202 S.A. Khan, M.C. Lacity / Journal of Strategic Information Systems 23 (2014) 190–209

Hypotheses 7a–7e were in relation to the moderating impact of offshoring success on the five relationships underHypotheses 1–5. Hypothesis 7a stated that offshoring success will moderate the positive relationship between social legit-imacy and organizational responsiveness such that the relationship will be less positive for those with high offshoring suc-cess as opposed to those with low offshoring success. Model 4 indicates that the interaction term between social legitimacyand offshoring success is negative and significant (b = �.20, p < .05) as hypothesized. Further, upon entering this interactionterm the change in R2 from Model 3 to Model 4 was significant (DR2 = .03; F Change = 5.16, p < .05). To further explore the

S.A. Khan, M.C. Lacity / Journal of Strategic Information Systems 23 (2014) 190–209 203

nature of this interaction, we plotted it at high and low levels of the moderator variable using values one standard deviationabove and below the mean (Dawson and Richter, 2006). Fig. 2a clearly shows that the otherwise strongly positive slope forthe effect of social legitimacy on responsiveness becomes less positive when offshoring success is high. Together, theseresults provided strong support for Hypothesis 7a.

As Models 5–7 indicate, the interaction coefficients are not significant and the changes in R2 from one model to the nextare not significant. Hypotheses 7b, 7c, and 7d are not supported.

Hypothesis 7e stated that offshoring success will moderate the relationship between regulatory environment uncertaintyand responsiveness such that the relationship will be less positive when success is high as opposed to when it is low. Model 8indicates that the coefficient for the interaction between regulatory environment uncertainty and responsiveness is negativeand significant (b = �.19, p < .05) as hypothesized. Further, the change in R-square from Model 7 to 8 was also significant(DR2 = .03; F Change = 4.10, p < .05). Fig. 2b shows that the slope of regulatory environment uncertainty becomes more neg-ative when offshoring success is low when compared to when offshoring success is high. Together, these results indicatedsupport for Hypothesis 7e.

5. Discussion

We assessed the extent to which organizations are responsive to anti-offshoring institutional pressures by reducing and/or postponing their IT and BP offshoring. We attempted to explain the extent of organizational responsiveness based on boththe characteristics of anti-offshoring institutional pressures as well as organizations’ prior success with offshoring while con-trolling for important organizational and external factors. In a descriptive sense, results do not indicate an impending driftaway from offshoring. However, an interesting set of findings emerged from this study. The findings are generally consistentwith institutional theory accounts described earlier (Covaleski and Dirsmith, 1988; Oliver, 1991; Pache and Santos, 2010;Powell and DiMaggio, 1991; Suchman, 1995). In the context of IT and BP offshoring, however, these findings bring forth someimportant implications for research, practice, and policy.

5.1. Social legitimacy and organizational responsiveness

Expectations of enhanced social legitimacy had a strong positive effect on organizational responsiveness. This resonateswith observations in the IT offshoring literature suggesting that organizations are aware of the ‘‘optics of offshoring’’ and doconsider such issues in making offshoring decisions (Smith and McKeen, 2004). It will be illuminating if future researchexplicitly considered such issues along with the traditional focus on technical organizational variables. Recent developmentsin the IT offshoring literature highlight corporate social responsibility (CSR) during offshore engagements (Babin et al., 2011).Our findings suggest that implications of CSR may extend to the very notion of offshoring to begin with. That is, offshoringdecisions may well fall within what Basu and Palazzo (2008) term as the span of organizational commitment to CSR. Forexample, do business decisions such as outsourcing take into account the firm’s professed CSR approach, or are made with-out such considerations? Are firms with certain characteristics more likely to expend greater effort in stakeholder consulta-tion prior to an offshoring decision (Basu and Palazzo, 2008)?

The social legitimacy finding has implications for practice as well. Results imply that client organizations may seek tomatch their professed social responsibility approach (Basu and Palazzo, 2008), whatever it may be, with the very businessdecision of offshoring. On the other hand, the value proposition of service providers may also need to include CSR implica-tions of offshoring decisions and such a value proposition may need to go beyond the process of offshoring. However, thisstudy was unable to examine whether pressures against offshoring may have differential impact on global service-providerswith substantial ‘‘onshore’’ presence in North America and Europe versus those providers that do not.

1

2

3

4

5

6

7

Low Social Legitimacy High Social Legitimacy

Res

pons

iven

ess

Low Offshoring Success

High Offshoring Success

Fig. 2a. Interaction between social legitimacy and offshoring success.

1

2

3

4

5

6

7

Low Reg. Env. Uncertainty

High Reg. Env. Uncertainty

Res

pons

iven

ess

Low Offshoring Success

High Offshoring Success

Fig. 2b. Interaction between regulatory environment uncertainty and offshoring success.

204 S.A. Khan, M.C. Lacity / Journal of Strategic Information Systems 23 (2014) 190–209

5.2. Dependence on Governments and organizational responsiveness

Dependence on Governments, measured as a significant portion of revenues from government sales, was not related toorganizational responsiveness. This finding is surprising given the strong precedence (Oliver, 1991; Pfeffer and Salancik,1978). We conducted post hoc analyses for this hypothesis using three alternative operationalizations of dependence. Weused extent of regulatory burden (Hillman et al., 2004) for organizations, percentage of union representation in total workforce,and number of Information Systems employees (cf., Goodstein, 1994; Milliken et al., 1998) within organizations. Extent of reg-ulatory burden captured another facet of organizational dependence on governments (Hillman et al., 2004). The other twovariables attempted to model organizational dependence on two other important stakeholders that have traditionally beenviewed as opponents of offshoring. As indicated earlier, unions have long argued against offshoring and are strong supportersof protectionist measures. Given this, the higher the percentage of union represented employees the greater the dependenceand hence the greater the responsiveness. Similar logic was used for number of IS employees. All three alternative indicatorsdid not change the results and were all not significant.

It is clear from these results that the role of government in influencing the offshoring landscape is more complicated thanwe modeled. It is possible that governmental expectations regarding offshoring may not be as uniform as apparent frompolitical posturing. Further, even when government expectations are clearly geared toward a reduction in offshoring, thetools at their disposal to ‘‘encourage’’ organizations could vary based on the nature of organizational dependence on govern-ments. For example, government regulation such as the year 2004 legislation in Tennessee (Tennessee House Bill 2344) thatgives preference to data entry and call center operations vendors who ensure that the services are provided by US citizens6 orthe 2005 legislation in New Jersey (New Jersey Senate Bill 494) which prohibits state contract work from being performed off-shore,7 is likely to directly affect those firms engaging in state contracts. On the other hand, it may have little direct impact onother firms. Future research in this area could benefit from including a finer grained analysis (of at least) at the industry level tobetter account for the role of government and other important stakeholders.

5.3. Organizational plans for offshore portfolio and organizational responsiveness

Results suggest that those organizations that planned on increasing their offshore footprint in the next three years wereless responsive than those organizations that planned to maintain or reduce their offshore headcounts. This finding is con-sistent with institutional theory accounts that suggest that, to the extent responsiveness to institutional pressures conflictswith organizational goals, organizations will be more likely to resist full conformity (Covaleski and Dirsmith, 1988; Oliver,1991; Pache and Santos, 2010; Powell and DiMaggio, 1991).

5.4. Complying actions of other firms and organizational responsiveness

The strong positive effect of complying actions of other firms on organizational responsiveness is indicative of mimeticinfluences well documented in the IS outsourcing literature (e.g., Ang and Cummings, 1997). A possible implication forpractice is that service provider organizations may need to actively manage client perceptions regarding the future ofoffshoring given the rather potent effect of mimetic influences in shaping organizational responses.

6 The Hindu – Business Line, September 14, 2010. Available online at: http://www.thehindubusinessline.in/2010/09/15/stories/2010091552280700.htm(retrieved 25.03.13).

7 State of Connecticut General Assembly, Office of Legislative Research, Report # 2004-R-0647, September 14, 2004 and 2004-R-0241, March 9, 2004.Available online at http://www.cga.ct.gov/2004/rpt/2004-R-0647.htm and http://www.cga.ct.gov/2004/rpt/2004-R-0241.htm (retrieved on 18.06.11). See,http://www.cga.ct.gov/olr/sitesearch.asp by searching for ‘‘outsourcing’’ for additional state level regulatory restrictions.

S.A. Khan, M.C. Lacity / Journal of Strategic Information Systems 23 (2014) 190–209 205

5.5. Regulatory environment uncertainty and organizational responsiveness

The significant but negative effect of regulatory environment uncertainty on organizational responsiveness was in theopposite direction to our hypothesis. One possible explanation is that to the extent executives perceive that regulatorychanges impacting offshoring are in fact predictable, they are more likely to take them into account in their immediate deci-sion making. When any such changes are not predictable, organizations adopt strategies to insulate themselves from sudden,unexpected shifts in the environment but do not commit to a particular strategic direction (Milliken, 1987). For example,while organizations may choose not to lower the extent of offshoring given the unpredictability of impending regulation,they may adopt buffering strategies such as choosing to work with service-providers who can shift from offshore deliveryto onshore delivery if the need arises (cf. Reynolds, 2011). This implies that future research may need to explore both respon-siveness and buffering strategies simultaneously as consequences of regulatory environment uncertainty.

Another set of reasons for this finding perhaps deal with how organizations interface with government and regulation asdiscussed earlier. In one view, the extent of and nature of regulation faced by organizations varies by the industry.8 Morespecifically, regulation pertaining to offshoring itself is multi-faceted and could have different implications for organizationsin conjunction with their exiting regulatory environment. To illustrate, documented legislative attempts include removal oftax subsidies to organizations that offshore, mandatory disclosure of geographical location in calls to and from offshore call cen-ters; ban on transmission of personal or financial information of customers abroad without complying with a set of conditions;mandatory disclosure about activities relating to offshoring, such as lay-offs and outsourcing production; and economic sanc-tions such as elimination of state assistance to businesses that have laid off American employees and shifted jobs to a foreigncountry (Canto and van Gorp, 2007; Gupta and Sao, 2009; Manley and Hobby, 2006; Mordecai, 2005). Other legislative attemptsare indirect but perhaps more potent. These include bills surrounding data privacy, labor negotiations, protection of intellectualproperty, bureaucratic preconditions on offshore contracts, and visa policies aimed at either restricting the number of foreignworkers or increasing the costs of obtaining work visas (Canto and van Gorp, 2007; Gupta and Sao, 2009). Thus, it appears thateven if such legislative attempts were to be successful the impact on firms is likely to vary—being subtly contingent on how afirm interfaces its regulatory environment.

5.6. Offshoring success and organizational responsiveness

One of the most interesting set of findings from this research relates to how the effects of organizations’ prior successwith offshoring come to bear on their responsiveness to anti-offshoring pressures. We did not find evidence for the hypoth-esis that greater offshoring success would result in lower organizational responsiveness. Prior work has shown that organi-zations are more responsive when the technical or strategic benefits obtained from compliance are greater (e.g., Goodstein,1994; Milliken et al., 1998). However, such logic does not seem to extrapolate well based on current results. That is, thepotential for losing out on existing benefits from offshoring did not at least directly lower organizational responsiveness.

One possible reason could be the way we operationalized success. Our current focus was on traditional metrics of offsh-oring such cost savings, access to skilled personnel and improved flexibility. However, there are other benefits and chal-lenges associated with offshoring which could be particularly idiosyncratic to IT offshoring. For instance, levels of culturalintegration achieved, maturity in managing virtual teams and processes geared toward knowledge transfer, and ability tomanage high offshore employee turnover are all germane (Kotlarsky and Oshri, 2008; Oshri et al., 2008; Oshri et al.,2009b). On the one hand, organizations that have managed to do well in such regards may wish to continue further irrespec-tive of the metrics we included. On the other hand, despite documented success in cost savings or increased access to skilledpersonnel, for example, organizations facing challenges in areas such as cultural integration, knowledge transfer and turn-over, may consider a reduction in offshoring. Possibly, such other benefits or challenges may have a more pronounced effectin interaction with our study’s independent variables.

Further, it is possible that organizations consider longer term success in offshoring initiatives more relevant to organiza-tional performance and hence the social legitimacy such success garners than complying with anti-offshoring pressures inthe short term. As one senior executive of a multinational company noted, ‘‘Because we are a global company, our strategyincludes making use of a broader global workforce. Efforts regarding offshoring pressures tend to focus on communications andPR sensitivities and reacting to issues that arise rather than any change in strategy.’’ This is a fruitful area for future researchas it may help explain our non-finding but more importantly provide a more nuanced explanation of this rather complicatedinterplay between various facets of longer term offshoring strategies, the dynamics of benefits and challenges during offsh-oring, and the broader anti-offshoring context.9

5.7. Offshoring success, social legitimacy, and organizational responsiveness

While offshoring success had no direct effect on organizational responsiveness, it did attenuate the otherwise strong posi-tive effect of social legitimacy. Expectations of enhanced social legitimacy did not lead to as greater responsiveness when

8 We thank two anonymous reviewers for suggesting this line of reasoning.9 We thank reviewer 3 for providing these insights.

206 S.A. Khan, M.C. Lacity / Journal of Strategic Information Systems 23 (2014) 190–209

offshoring success was high. This finding contributes to the broader institutional theory based understanding of organiza-tional responses by highlighting the dynamics of institutional and resource dependence explanations behind the motivesof organizational responses to external expectations. That is, compliance to external expectations under the institutional lensmay be viewed as self-serving while non-compliance under the resource dependence perspective may also be consideredself-serving (Oliver, 1991).

This logic rests on the idea that both theories suggest organizations attempt to obtain stability and legitimacy, bothassume that organizations may be interest driven, and both highlight the importance of obtaining legitimacy for purposesof demonstrating social worthiness and garnering resources (DiMaggio, 1988; Oliver, 1991; Powell and DiMaggio, 1991;Scott, 1995; Suchman, 1995). Under such logic then, Oliver (1991) suggests that the advantages of compliance from an insti-tutional perspective include increased prestige and social legitimacy among others. On the other hand, the advantages ofnon-compliance from a resource dependence perspective include the ability to maintain discretion or autonomy over inter-nal processes and the flexibility to permit continual adaptation vis-à-vis the task environment. Our findings show that whenorganizations’ strategic actions (here offshoring) become the target of counter institutional pressures, the organizationallevel of success with such strategic actions does not blatantly result in non-responsiveness to institutional pressures butcomes into play in a more subtle manner.

5.8. Offshoring success, regulatory environment uncertainty, and organizational responsiveness

Offshoring success exacerbated the negative effect of regulatory environment uncertainty. Greater regulatory environ-ment uncertainty led to even lower responsiveness when success with offshoring was high. At the outset, this findingand the finding related to the direct negative effect of regulatory environment uncertainty on organizational responsivenesshighlights the utility of more explicitly including policy in the study of strategic information systems issues (Galliers andJarvenpaa, 2002). Scholars across disciplines have cautioned against protectionist measures with respect to offshoring(Bertrand, 2011; King, 2005; Mankiw and Swagel, 2006; Venkatraman, 2004). Our findings hint that such measures maynot have had a direct impact on offshoring thus far. One possible reason could be that despite numerous legislative attemptsat curbing offshoring a very small proportion of such attempts actually resulted in laws.10 It is unclear what impact, if at all,future legislative attempts and actual laws will have on the extent of organizational offshoring. As legislative attempts aimed atdirectly curbing offshoring continue,11 our findings nevertheless suggest that uncertainty surrounding future offshoring legis-lation actually lowered organizational responsiveness.

In terms of research implications, it is clear that regulatory environment uncertainty and policy in general is relevant tostrategic information systems issues. Policy may not only affect IT and BP offshoring client and supplier organizations but itis also quite possible that organizations actively attempt to shape policy (Galliers and Jarvenpaa, 2002; Hillman and Hitt,1999; Oliver, 1991). One specific example is the consistent attempt by US lawmakers to shape temporary work visa(e.g., Hypothesis 1-b) policies that could significantly alter the value propositions of offshore service providers. A bordersecurity bill was passed in July 2010 that had a provision for a steep increase in the visa fees for Hypothesis 1-b and L-1visas. These increases in visa fees were estimated to add about $250 million to the annual visa fee expenditures for theIndian IT industry.6 In the back drop of the proposed introduction of the bill S.3816 ‘‘Creating American Jobs and Ending Offsh-oring Act,’’ the Indian offshoring industry began to show its concern. In September 2010, a high profile delegation led by theIndian industry group, National Association of Software and Services Companies (NASSCOM) and comprising senior repre-sentatives from Indian firms such as Wipro, Infosys, and TCS, visited Washington to voice its concern with law makers. Mr.Ameet Nivsarkar, NASSCOM Vice-President summarized the purpose of this visit: ‘‘It is a focused delegation. The idea is tomake sure that we communicate our disappointment on the anti-outsourcing rhetoric, and also ensure that it does not becomea trend in the US.6’’

Taken together, our findings have a broader implication for IT offshoring research. While the strategic drivers of offsh-oring are well documented (Lacity et al., 2010), this study highlights the need for incorporating both strategic explana-tions and counter institutional influences for offshoring. While some industry reports claim that IT and BP servicesoffshoring will remain robust and un-phased in light of anti-offshoring pressures (Gartner Research, Iyengar, 2011a,2011b) other reports claim a noticeable trend among US and Canadian firms to repatriate once offshored jobs and agrowing preference to keep outsourced work within their countries (Technology Partners International, Reynolds,2011). The latter claim is consistent with those from a January 2012 US White House forum on ‘‘Insourcing AmericanJobs’’. The forum was designed to encourage firms to bring jobs back to the US and to showcase firms that are alreadydoing so.12

10 The National Foundation of American Policy claims that between 2003 and 2007 alone upwards of 400 bills attempted to curb offshoring in one way oranother of which only 12 became law. Available online at http://www.nfap.com/pdf/0407OutsourcingBrief.pdf (retrieved 25.03.13). Foundation website: http://www.nfap.com.

11 For example, US Call Center and Consumer Protection Act (HR 3596) http://www.pcadvisor.co.uk/news/small-business/3342894/anti-offshoring-bill-scores-77-us-house-co-sponsors/.

12 See US White House Press Release on ‘‘Insourcing American Jobs’’ dated January 7, 2012 http://www.whitehouse.gov/the-press-office/2012/01/07/president-obama-hosts-insourcing-american-jobs-forum-white-house.

S.A. Khan, M.C. Lacity / Journal of Strategic Information Systems 23 (2014) 190–209 207

6. Limitations and further suggestions for future research

This study has several limitations that must be considered in interpreting its findings. First, in terms of study respondents,we could not draw a random sample from a known sampling frame. However, this set of respondents was ideal for the studypurposes and access to such respondents would have otherwise proved very difficult in a random sample approach. Also,given a lack of archival data sources regarding study variables and in the interest of keeping this project feasible we resortedto a cross-sectional survey based design. To the best of our knowledge there are no sources of firm level data on servicesoffshoring and this remains a major challenge in studying the extent of offshoring over-time in conjunction with firmand macro factors (c.f., Tambe and Hitt, 2012). Although difficult, future research may capitalize on unique data sourcesto incorporate a longitudinal design. Such a design may allow accounting for fluctuations such as increased focus on offsh-oring in election years. More importantly, it may shed some light on the interplay between organizational success/long termstrategic initiatives with respect to offshoring and anti-offshoring institutional pressures. A perspective we failed to captureadequately in this study.

Second, our exploratory study looked at IT and BP offshoring in combination. That is, we are unable to report any potentialdifferences in organizational responsiveness based on whether one considers IT offshoring in particular as opposed to IT andBP combined. It is quite likely that IT offshoring due to its many idiosyncrasies, as discussed above, may garner a different setof organizational responses from those for BP offshoring. Future work may attempt to shed light on such differences in bothbetween firm and within firm responsiveness to anti-offshoring pressures.

Third, we did not systematically consider any variation induced by an organization’s industry or national origin. Althoughwe considered extent of regulatory compliance as a self-reported item in our post hoc analyses, it is possible that organiza-tions in different industries may experience varied levels of direct regulation or other pressures in terms of offshoring. Sim-ilarly, organizations in certain industries may be more consumer-facing than others and hence open to greater scrutiny bythe media and general public. In terms of national origin (home country) a majority of the firms represented in this surveyare from the United States. Due to lower number of responses from other countries, we were unable to include a countrylevel analysis for this study. Thus, we settled for a dichotomous control variable. However, it is quite possible that countrylevel socio-economic, political, and legal idiosyncrasies play a significant role in both the institutional context as well as onhow firms respond. In sum, future research may more systematically explore these two variables especially in relation toorganizational dependence on governments as well the impact of regulatory environment uncertainty.13

Fourth, we were unable to tease out any possible effects due to the possibly myriad offshore destinations organizationscould use. In other words, we take a simplistic view on offshoring when in reality organizational offshoring initiatives may bedifferently subject to anti-offshoring pressures depending on the offshore locations being used. Organizational responses andtheir concerns for social legitimacy are quite possibly affected by the location.14 Further, while an organization may reduceoffshoring to one location it could increase it in another location. Although difficult, we encourage future research to creativelyexplore this potentially important idea.

Fifth, we could not include a systematic assessment of the impact of onshore corporate tax policies on organizationalselection of governance models for IT and BP services. Analysts have suggested that certain corporate tax policies in ‘‘homecountries’’ may incentivize offshoring of services and manufacturing – particularly so using a captive governance model. Forexample, in the United States, multinational firms with their headquarters in the US are taxed on a residence basis and tax-ation only occurs when income is repatriated from offshore locations. This provides an incentive to incur income in lower-tax countries as income can grow without being taxed before repatriation (Bradley, 2011; Clausing and Avi-Yonah, 2007).This is an important aspect tied to offshoring that has yet to be fully considered within the IS literature on offshoring.14

Sixth, we did not take into account that organizations maybe facing ‘‘pro-offshoring’’ pressures from constituents such asconsulting firms and powerful organizational actors such as the board of directors. In other words, there is a possibility ofconflicting pressures on organizations with respect to offshoring, beyond their technical or operational concerns (we didcontrol for internal cost reduction pressures). To the extent this is the case, organizational responses may be different ascompared to when there is less fragmentation in the organizational field (Pache and Santos, 2010). This is an exciting areafor future research. Divergence in expectations along with internal (organizational) representation of issues could be studiedsimultaneously with respect to organizational responses (Pache and Santos, 2010). Multiplicity or conflict in expectations ordemands among constituents puts organizations in a precarious position – simple conformity in such instances is unlikely(Oliver, 1991; Pache and Santos, 2010).

7. Concluding remarks

As research on offshoring continues, we believe that more systematic inclusion of institutional influences is warranted forat least two reasons. First, to the extent one believes in the strategic inevitability of offshoring regardless of the anti-offsh-oring sentiment (Venkatraman, 2004) then understanding how potent is the impact of the institutional context in hinderingor promoting offshoring becomes necessary. Second, if one espouses that organizations should curb their offshore initiatives

13 We thank reviewer 2 for suggesting this line of analysis.14 We thank reviewer 3 for highlighting this limitation.

208 S.A. Khan, M.C. Lacity / Journal of Strategic Information Systems 23 (2014) 190–209

then understanding the efficacy/utility or lack thereof of the various institutional tactics geared toward obtaining organiza-tional compliance becomes also necessary.

References

Abbott, P., Zheng, Y., Du, R., Willcocks, L.P., 2013. From boundary spanning to creolization: a study of Chinese software and services outsourcing vendors.Journal of Strategic Information Systems 22, 121–136.

Ang, S., Cummings, L., 1997. Strategic response to institutional influences on information systems outsourcing. Organization Science 8 (3), 235–256.Babin, R., Briggs, S., Nicholson, B., 2011. Corporate social responsibility and global IT outsourcing. Communications of the ACM 54 (9), 28–30.Basu, K., Palazzo, G., 2008. Corporate social responsibility: a process model of sensemaking. Academy of Management Review 33 (1), 122–136.Bertrand, O., 2011. What goes around, comes around: effects of offshore outsourcing on the export performance of firms. Journal of International Business

Studies 42, 334–344.Beulen, E., 2010. Long-held perceptions of the consequences of IT offshoring will become a reality: fewer IS jobs in developed countries. Journal of

Information Technology 25 (4), 376–377.Bhalla, A., Sodhi, M.S., Son, B.-G., 2008. Is more IT offshoring better? An exploratory study of western companies offshoring to South East Asia. Journal of

Operations Management 26 (2), 322–335.Bradley, S.J., 2011. Essays in Property Taxation and Multinational Tax Avoidance: Round-tripping of Domestic Profits under the American Jobs Creation Act

of 2004, Economics. University of Michigan.Canto, C.S.A., van Gorp, D.M., 2007. A comparative analysis of European and US regulatory responses to offshoring. Journal of Information Technology Case

and Application Research 9 (3), 31–48.Carmel, E., Agarwal, R., 2002. The maturation of offshore sourcing of information technology work. MIS Quarterly Executive 1 (2), 65–78.Carmel, E., Tjia, P., 2005. Offshoring Information Technology: Sourcing and Outsourcing to a Global Workforce. Cambridge University Press, Cambridge.Carmel, E., Dedrick, J., Kraemer, K.L., 2009. Routinizing the offshore choice: applying diffusion of innovation to the case of EDS. Strategic Outsourcing: An

International Journal 2 (3), 223–239.Chee-Wee, Tan, Benbasat, Izak, Cenfetelli, Ronald T., 2013. IT-mediated customer service content and delivery in electronic governments: an empirical

investigation of the antecedents of service quality. MIS Quarterly 37 (1), 77–109.Choudhury, V., Sabherwal, R., 2003. Portfolios of control in outsourced software development projects. Information Systems Research 14 (3), 291–314.Clausing, K., Avi-Yonah, R.S., 2007. Reforming Corporate Taxation in a Global Economy: A Proposal to Adopt Formulary Apportionment. Hamilton Project

Discussion Paper. The Brookings Institution, pp. 2–34.Covaleski, M.A., Dirsmith, M.W., 1988. An institutional perspective on the rise, social formation, and a fall of a university budget category. Administrative

Science Quarterly 33, 562–587.Currie, W., Michell, V., Abanishe, O., 2008. Knowledge process outsourcing in financial services: the vendor perspective. European Management Journal 26

(2), 94–104.Davis, G.F., 1991. Agents without principles? The spread of the poison pill through the intercorporate network. Administrative Science Quarterly 36, 583–

613.Dawson, J.F., Richter, A.W., 2006. Probing three-way interactions in moderated multiple regression: development and application of a slope difference test.

Journal of Applied Psychology 91, 917–926.Dedrick, J., Carmel, E., Kraemer, K.L., 2011. A dynamic model of offshore software development. Journal of Information Technology 26, 1–15.Dibbern, J., Winkler, J., Heinzl, A., 2008. Explaining variations in client extra costs between software projects offshored to india. MIS Quarterly 32 (2), 333–

366.DiMaggio, P.J., 1988. Interest and agency in institutional theory. In: Zucker, L. (Ed.), Institutional Patterns and Organizations: Culture and Environment.

Cambridge, MA: Ballinger.DiMaggio, P.J., Powell, W.W., 1983. The iron cage revisited: institutional isomorphism and collective rationality in organizational fields. American

Sociological Review 48, 147–160.Doh, J.P., 2005. Offshore outsourcing: implications for international business and strategic management theory and practice. Journal of Management Studies

42 (3), 695–704.Gable, G., 2010. Strategic information systems research: an archival analysis. The Journal of Strategic Information Systems 19 (1), 3–16.Galliers, R.D., Jarvenpaa, S., 2002. Editorial. The Journal of Strategic Information Systems 11 (1), 1–3.Garson, G. David, 2013. Statnotes: topics in multivariate analysis.Gokhale, A.A., 2007. Offshore outsourcing: a Delphi study. Journal of Information Technology Case and Application Research 9 (3), 6–18.Goodman, S.E., Ramer, R., 2007. Global sourcing of IT services and information security: prudence before playing. Communications of the AIS 20, 812–823.Goodstein, J., 1994. Institutional pressures and strategic responsiveness: employer involvement in work-family issues. Academy of Management Journal 37,

350–382.Grappi, S., Romani, S., Bagozzi, R.P., 2013. The effects of company offshoring strategies on consumer responses. Journal of the Academy of Marketing Science

2013 (41), 683–704.Gregory, R.W., Beck, R., Keil, M., 2013. Control balancing in information systems development offshoring projects. MIS Quarterly 37 (4), 1211–1232.Grover, V., Cheon, M., Teng, J., 1996. The effect of service quality and partnership on the outsourcing of information systems functions. Journal of

Management Information Systems 12 (4), 89–116.Gupta, A., 2010. Offshoring, IS employment and the IS discipline: additional considerations. Journal of Information Technology 25 (4), 378–379.Gupta, A., Sao, D., 2009. Anti-offshoring legislation and United States federalism: the constitutionality of federal and state measures against global

outsourcing of professional services. Texas International Law Journal 44, 629–663.Gupta, A., Seshasai, S., Mukherji, S., Ganguly, A., 2007. Offshoring: the transition from economic drivers toward strategic global partnership and 24-hour

knowledge factory. Journal of Electronic Commerce in Organizations 5 (2), 1–23.Gupta, A., Mattarelli, E., Shesasai, S., Broschak, J., 2009. Use of collaborative technologies and knowledge sharing in co-located and distributed teams:

towards the 24-h knowledge factory. Journal of Strategic Information Systems 18, 147–161.Hahn, E.D., Doh, J.P., Bunyaratavej, K., 2009. The evolution of risk in information systems offshoring: the impact of home country risk, firm learning, and

competitive dynamics. MIS Quarterly 33 (3), 597–616.Hillman, A.J., Hitt, M.A., 1999. Corporate political strategy formulation: a model of approach, participation, and strategy decisions. Academy of Management

Review 24 (4), 825–842.Hillman, A.J., Keim, G.D., Schuler, D., 2004. Corporate political activity: a review and research agenda. Journal of Management 30 (6), 837–857.Hirschheim, R., Newman, M., 2010. Houston, we’ve had a problem...... offshoring, IS employment and the IS discipline: perception is not reality. Journal of

Information Technology 25 (4), 358–372.Hoffman, M.E.S., 2010. Job losses and perceptions of globalization. Journal of World Trade 44 (5), 967–983.Iacovou, C.L., Nakatsu, R., 2008. A risk profile of offshore-outsourced development projects. Communications of the ACM 51 (6), 89–94.Ingram, P., Simons, T., 1995. Institutional and resource dependence determinants of responsiveness to work-family issues. Academy of Management Journal

38 (5), 1466–1482.Iyengar, P., 2011a. CIO Concerns: Global Sourcing Demand-Side Trends. Gartner Research, Stampford, CT.Iyengar, P., 2011b. CIO Concerns: Global Sourcing Supply-Side Trends. Gartner Research, Stampford, CT.

S.A. Khan, M.C. Lacity / Journal of Strategic Information Systems 23 (2014) 190–209 209

Julian, S.D., Ofori-Dankwa, J.C., Justis, R.T., 2008. Understanding strategic responses to interest group pressures. Strategic Management Journal 29, 963–984.Kaiser, K., Hawk, S., 2004. Evolution of offshore software development: from outsourcing to co-sourcing. MIS Quarterly Executive 3 (2), 69–81.Karamouzis, Frances, 2011. Key Issues for IT Services Sourcing. Gartner Research.Kassinis, G., Vafeas, N., 2006. Stakeholder pressures and environmental performance. Academy of Management Journal 49 (1), 145–159.King, W.R., 2005. Innovation in responding to the threat of IT offshoring. Information Systems Management 22 (4), 80–81.King, W.R., Sabherwal, R., 1992. The factors affecting strategic information systems applications: an empirical assessment. Information & Management 23

(4), 217.King, W.R., Torkzadeh, G., 2008. Foreword: information systems offshoring: research status and issues. MIS Quarterly 32 (2), 205–225.Kotabe, M., Mol, M., Murray, J., Parente, R., 2012. Outsourcing and its implications for market success: negative curvilinearity, firm resources, and

competition. Journal of the Academy of Marketing Science 40 (2), 329–346.Kotlarsky, J., Oshri, I., 2008. Country attractiveness for offshoring and offshore outsourcing: additional considerations. Journal of Information Technology 23,

228–231.Lacity, M., Rottman, J., 2008. Offshore Outsourcing of IT Work. Palgrave Macmillan, Hampshire, United Kingdom.Lacity, M., Willcocks, L.P., 2013. Beyond cost savings: outsourcing business processes for innovation. Sloan Management Review 54 (3), 63–69.Lacity, M., Khan, S.A., Willcocks, L., 2009. A review of the IT outsourcing literature: insights for practice. Journal of Strategic Information Systems 18 (3), 130–

146.Lacity, M., Khan, S.A., Yan, A., Willcocks, L., 2010. A review of the IT outsourcing empirical literature and future research directions. Journal of Information

Technology 25, 395–433.Lacity, M., Solomon, S., Yan, A., Willcocks, L., 2011. Business process outsourcing studies: a critical review and research directions. Journal of Information

Technology 26 (4), 221–258.Larsen, M.M., Manning, S., Pedersen, T., 2012. Uncovering the hidden costs of offshoring: the interplay of complexity, organizational design, and experience.

Strategic Management Journal 34, 533–552.Levy, D., 2005. Offshoring in the new global political economy. Journal of Management Studies 42 (3), 685–693.Lewin, A.Y., Massini, S., Peeters, C., 2009. Why are companies offshoring innovation? The emerging global race for talent. Journal of International Business

Studies 40 (6), 901–925.Mankiw, N.G., Swagel, P., 2006. The politics and economics of offshore outsourcing. Journal of Monetary Economics 53, 1027–1056.Manley, T.J., Hobby, S.M., 2006. Globalization of work: offshore outsourcing in the IT age. Emory International Law Review 18, 401–419.Mignerat, M., Rivard, S., 2009. Positioning the institutional perspective in information systems research. Journal of Information Technology 24, 369–391.Miles, R.E., Snow, C.C., 1978. Organizational Strategy, Structure, and Process. McGraw-Hill Book Company, New York.Milliken, Frances J., 1987. Three types of perceived uncertainty about the environment: state, effect, and response uncertainty. Academy of Management

Review 12 (1), 133–143.Milliken, Frances J., Martins, Luis L., Morgan, Hal., 1998. Explaining organizational responsiveness to work-family issues: the role of human resource

executives as issue interpreters. Academy of Management Journal 41 (5), 580–592.Mirani, R., 2007. Procedural coordination and offshored software tasks: lessons from two case studies. Information & Management 44, 216–230.Mordecai, 2005. Anti-offshoring legislation: the new wave of protectionism – the backlash against foreign outsourcing of American jobs. Richmond Journal

of Global Law and Business 5, 85–105.Nieto, M.J., Rodrı́guez, A., 2011. Offshoring of R&D: looking abroad to improve innovation performance. Journal of International Business Studies 42, 345–

361.Oliver, Christine, 1991. Strategic responses to institutional processes. The Academy of Management Review 16 (1), 145–179.Oshri, I., Corbett, M.F., 2011. Offshoring Strategies: Evolving Captive Center Models. MIT Press, Cambridge, MA.Oshri, I., van Uhm, Bob, 2012. A historical review of the information technology and business process captive centre sector. Journal of Information

Technology 27, 270–284.Oshri, I., Fenema, P., Kotlarsky, J., 2008. Knowledge transfer in globally distributed teams: the role of transactive memory. Information Systems Journal 18

(6), 593–616.Oshri, I., Kotlarsky, J., Rottman, J., Willcocks, L., 2009a. Global sourcing: recent trends and issues. Information Technology and People 22 (3), 192–200.Oshri, I., Kotlarsky, J., Willcocks, L., 2009b. The Handbook of Global Outsourcing and Offshoring. Palgrave Macmillan, London.Pache, Anne-Claire, Santos, Filipe, 2010. When worlds collide: the internal dynamics of organizational responses to conflicting institutional pressures.

Academy of Management Review 35 (3), 455–476.Pfeffer, J., Salancik, G.R., 1978. The External Control of Organizations. Harper & Row, New York, NY.Powell, W.W., DiMaggio, P.J., 1991. The New Institutionalism in Organizational Analysis. University of Chicago Press, Chicago.Rao, M.T., Poole, W., Raven, P.V., Lockwood, D.L., 2006. Trends, implications, and responses to global IT sourcing: a field study. Journal of Global Information

Technology Management 9 (3), 5–23.Reynolds Paul, 2011. TPI Momentum 2011 Market Trends & Insights Geography Report <http://www.tpi.net/web/TPITop5/>. Technology Partners

International, Inc., Stamford, CT.Rottman, J., Lacity, M., 2006. Proven practices for effectively offshoring IT work. Sloan Management Review 47 (3), 56–63.Rottman, W., Lacity, M., 2008. A US client’s learning from outsourcing IT work offshore. Information Systems Frontiers 10, 259–275.Sakthivel, S., 2007. Managing risk in offshore systems development. Communications of the ACM 50 (4), 69–75.Schmeisser, B., 2013. A systematic review of literature on offshoring of value chain activities. Journal of International Management 19, 390–406.Scott, W.R., 1995. Institutions and Organizations. Sage, Thousand Oaks, CA.Seo, M., Creed, W.E.D., 2002. Institutional contradictions, praxis, and institutional change: a dialectical perspective. Academy of Management Review 27,

222–247.Shao, B., David, S.J., 2007. The impact of offshore outsourcing on IT workers in developed countries. Communications of the ACM 50 (2), 89–95.Smith, H.A., McKeen, J.D., 2004. Developments in practice XIV: IT outsourcing – how far can you go? Communications of the AIS 14, 508–520.Straub, D.W., Boudreau, M.C., Gefen, D., 2004. Validation guidelines for IT positivist research. Communications of the Association for Information Systems 13

(24), 380–427.Suchman, M.C., 1995. Managing legitimacy: strategic and institutional approaches. Academy of Management Review 20, 571–610.Sutcliffe, Kathleen M., 1994. What executives notice: accurate perceptions in top management teams. Academy of Management Journal 37 (5), 1360–1378.Tambe, P., Hitt, L.M., 2012. Now IT’s personal: offshoring and the shifting skill composition of the US information technology workforce. Management

Science 58 (4), 678–695.Thelen, S.T., Yoo, B., Magnini, V.P., 2010. An examination of consumer sentiment toward offshored services. Journal of the Academy of Marketing Science 39

(2), 270–289.Vardi, M.Y., 2010. Globalization and offshoring of software revisited. Communications of the ACM 53 (5), 5–5.Venkatraman, N.V., 2004. Offshoring without guilt. Sloan Management Review 45 (3), 14–16.Westpahl, J.D., Zajac, E.J., 2001. Decoupling policy from practice: the case of stock repurchase programs. Administrative Science Quarterly 46 (2), 202–228.Wiener, M., Vogel, B., Amberg, M., 2010. Information systems offshoring – a literature review and analysis. Communications of the Association for

Information Systems 27 (1), 455–492.Wright, G.C., 2014. Revisiting the economic impact of offshoring. European Economic Review 66, 63–83.