A Transaction Cost Economics and a Foucauldian Approach to the Study of IT Outsourcing Governance

The aim of this thesis has been to provide a thorough examination on formal and relational elements of IT outsourcing governance as well as their interplay. In my research I conducted three longitudinal case studies in the financial services industry. In my examination, I initially focused on the characteristics of the exchange as these are instructed by the theory of transaction costs and provided a thorough investigation of the predictive power of the theory on the choice of governance structures. My findings demonstrated significant limitations that constrain the predictive power of the theory. Similarly to previous research I observed a neglect of the social context within which the transactions take place; an intense focus on cost minimization efforts; and an over-emphasis on the behavioral assumption of opportunism. I further identified that the theory of transaction costs treats the choice of governance structures as a decision that is relatively isolated from other challenges related to the execution of the outsourcing arrangement and a relative downplay of the impact of uncertainty in the generation of transaction costs in the case of non-specific assets. In my research, I additionally adopted a more integrated perspective in the assessment of formal and relational aspects of IT outsourcing governance and illustrated how the Foucauldian notions on governmentality, discourse and power relations can enhance our understanding. According to my findings, "contracts" and "relationships" appear to emerge as modes of governmentality and utilize different means of surveillance, discipline and control. These different modes can be complementary, but simultaneously mutually undermining, in outsourcing arrangements that emerge as dynamic - from contextual factors and the circuits of power relations that constitute these arrangements. Furthermore, Foucault's theorization draws attention to the fact that there is an 'outsourcing' discourse with recurring themes, issues, language and regularities. This discourse appears to discipline peoples' thoughts and actions and distinguishes between desirable and undesirable types of behaviour. In this manner, a Foucauldian perspective illuminates the productive character of power, not only in terms of the production of truth and knowledge, but also in terms of practical behaviours seen as appropriate and useful.