Research Report: Diffusion of Information Systems Outsourcing: A Reevaluation of Influence Sources

Information systems outsourcing is an increasingly popular IS management practice in companies of all sizes. Examining the adoption of IS outsourcing from the well-developed theoretical foundation of innovation diffusion may shed some light on significant factors that affect the adoption decision, and clarify some misperceptions. This study explores the sources of influence in the adoption of IS outsourcing. Using a sample of 175 firms that outsourced their IS functions during the period from January 1985 to January 1995, we tested three hypotheses of sources of influences using four diffusion models: internal influence, external influence, and two mixed influence models. Our findings suggest that the mixed influence is the dominant influence factor in the diffusion of IS outsourcing, and that there is no evidence of the “Kodak effect” in the IS diffusion process. This directly contradicts the conclusions of the Loh and Venkatraman 1992 study. Further discussions are provided about the potential problems in studies of influence sources of IT innovation diffusion.

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