Emphasis on accounting controls: asset specificity and the use of accounting and non-accounting information within IT outsourcing engagements

European Accounting Association (EAA)
Publication Type:
Conference Proceeding
31st Annual Congress European Accounting Association Conference Website Papers, 2008, pp. 1 - 20
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This study observes the nature of asset specificity in different Information Technology (IT) outsourcing typologies, and investigates the relevance of accounting and non-accounting numbers in relation to these outsourcing typologies, with consideration to the findings of literatures concerning Transaction Cost Economics Theory and Social Capital Theory. It represents a response to the lack of research on relationships of IT outsourcing engagements. A case study research method is used to analyse the effect of asset specificity on the nature of relationship, and the use of accounting and non-accounting information in supporting the decision making processes of the Outsourcing Service Provider. Contrary to the findings of many researchers, the outsourcing-service provider adopted an integrative approach to its relationships as opposed to a distributive approach even in engagements that were highly asset specific, and short-term in duration. Additionally, the nature of asset specificity for IT outsourcing engagements is not static, but dynamic and in continual flux. Overall, this study suggests that large IT outsourcing-service providers value non-accounting factors in decision-making processes, in addition to accounting information, thus reflecting the Integrative Outsourcing Typology. This further validated the fact that factors advocated by Social Capital Theory such as corporate reputation, trust and collaborative interactions are crucial in IT outsourcing relationships.
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