Task Interdependence and Firm Performance in Outsourced Service Operations

We conceptualize task interdependencebetween firms in outsourcedservice operations as an endogenous design choicemade by the outsourcingfirm. Then, utilizing relative firm efficiency and Tobin’s qas performance metrics, we examine the impacts of the task interdependencechoices of outsourcingfirms on their performances. We examine data, collected from a variety of sources, on 184 service alliances across nine industries. We find that task interdependencein outsourcedservice operations increases with the knowledge dependence of outsourcingfirms on their vendor firms and with other contract-related factors, such as alliance duration, transaction complexity, and repeat relationships. Results indicate that outsourcingfirms face challenges in choosing the appropriate levels of task interdependencein their outsourcedservice operations, and that excessive levels of task interdependencein outsourcedservice operations negatively affect the performances of outsourcingfirms, both in terms of relative ...