Cross-Cultural Differences Risks of Outsourcing  Term Paper

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Therefore, the standpoint of social embeddedness is a tool that offers to provide a clear picture if one wants to comprehend the contribution of the relational factors in the success of outsourced IS projects (Rai, Maruping and Venkatesh, 2009).

If one is to increase his/her comprehension and develop an insight about how to monitor and control outsourced IS projects, Johns' (2006 as cited in Rai, Maruping and Venkatesh, 2009) suggestions come in useful. He recommended that the theory be contextualized by assessing the effect of characteristics of social framework in the setting of outsourced IS projects. It should be assessed how the adopted cultural features of the project affect its success and performance.

Later, the social embeddedness standpoint needs to be contextualized to the setting of the outsourcing of IS projects and a cultural variation framework should be applied to assess mutual principles and standards for those projects that are represented by a client (John, 2006 as cited in Rai, Maruping and Venkatesh, 2009). The variations can be evaluated in two different levels:


Among the cultural standards at work (Hofstede et al. 1990 as cited in Rai, Maruping and Venkatesh, 2009) between the vendor and the client organization


Among the adopted cultural principles between two important roles (e.g., Srite and Karahanna 2006 as cited in Rai, Maruping and Venkatesh, 2009) of the client representative and the project leader

In their study, the researchers tested the hypothesis statistically after employing an analysis over one hundred and fifty five important information system projects that were outsourced from American organizations to a certain vendor organization in India that had Level 5 CMMi certification. This analysis adds to the overall literature on information system outsourcing by developing justifications of project and agency features for the success of the IS project, with elements associated to social framework and cultural variations (Rai, Maruping and Venkatesh, 2009).

The setting of outsourcing entails the client organization, which is onshore, seeking the products of the vendor organization that is offshore to administrate and manage the project of information system and by doing so, develop an intercultural exchange interaction while working on the project. This paper puts forth the idea that agent-theoretic standpoint does not entirely grasp the essence of the social framework along with the cultural setting of the transfer interaction wherein the outsourced information system development projects take place (Rai, Maruping and Venkatesh, 2009).

Jensen and Meckling (1976 as cited in Rai, Maruping and Venkatesh, 2009) elaborated by identifying the agency relationship as an agreement wherein one or more than one party agree to carry out a certain service on the behalf of the principle that also makes necessary that the agent be empowered with a certain decision making power by the principal (p. 308). Premised on this definition, the agency perspective outlines the exchange relationship within the outsourced project as a fair value relationship between the vendor and the client organization with the least amount of information transfer and trust and restricted amount of collective decision making. Therefore, whereas agency perspective suggests the points on how the objectives and practices of the agent and the principal can be arranged by means of offers and agreements, it does not take into account the ways the social framework of the outsourced information system project impacts on the economic decisions and results (Rai, Maruping and Venkatesh, 2009).

Studying intercultural arrangement is especially significant and relatable in today's environment in the field of international management (outsourcing in particular) as the cultural components can considerably impact the capability of organizations to survive against competition. Even though several researches have attempted to assess the influence of cultural components on international business concerns, the outcomes have not depicted a very conclusive or consistent finding.

The deficiencies in our comprehension of society and culture, its characteristics and the process of its impact on the interaction between organizations in a collaborative environment can be because of a number of reasons. First and foremost, the generic presumption in the majority part of the research states that nation can be appropriately employed as a substitute for cultural diversity. This may not be entirely true. Moreover, culture is not a compilation but is made up of organizational and national culture at the very least (Mittal, 2010).

The assessment of compound cultural affect on inter-organizational interactions is necessary as firms are integrated in the greater environment within which they are found and the alliance managers who are placed in various organizational and national cultures tend to understand and react to behavior of their partners in contradictory ways. The principles, behavior and norms of the managers are identified by both the cultural and the national settings along with the organizational environment of where they work (Mittal, 2010).

Given that any firm can be identified by its different organizational and national way of doing things, the important questions that arise are this: what is the type of relationship when the two organizations collaborate in the form of an alliance? What is the way through which the cultural elements affect the type of interaction between the project leaders in the two organizations? What is of more importance, the corporate or the national culture? (Mittal, 2010)

Instinctively, the outcome of the alliance between two organizations can be made possible or can be hampered by cultural differences. Cultural fit, as a term can be used to depict a phenomenon where cultures of the two organizations are in congruence and are thereby leading to an addition in value by means of shared trust, devotion, learning and effective communication. This analysis endeavors to depict a theoretical outline, to identify the elements of cultural fit that affects the standard of the interaction between two organizations in alliance (Mittal, 2010).

The paradigm depicted in the paper conducted by Mittal in 2010 premises on two basic things. Firstly, it is assumed that inter-firm interactions are founded on person-to-person interactions between the people present in the organizations who are part of the alliance. When these entities come together, the interaction condenses down to two people who are in alliance, from each of the organizations (Mittal, 2010). The relationship between the two entities can be comprehended by assessing the interaction between the two individuals of the organizations (Kale, Singh et al. 2000 as cited in Mittal, 2010). Secondly, the principles and behavioral norms of the leaders in the interaction are identified by both the cultural and national background, along with the organizational environment (Mittal, 2010).

In the following paragraphs, three sections are detailed. The first one entails the identifying of cross border collaborations. Second, the paper considers the idea of culture at both the organizational and national level and thirdly, it talks about the possibility of cultural fit among the organizations in alliance (Mittal, 2010).

Undoubtedly, cross cultural collaboration are a part of alliances as a whole. Alliance can be broadly defined as collaboration between organizations targeted at following mutual goals that are strategic in nature (Das and Teng 2001 as cited in Mittal, 2010). It can also be stated as a development of inter-firm collaborative plans of action revolving around an amalgamation of capabilities and competencies of the partnering organizations (Rajan, Varadarajan et al. 1995 as cited in Mittal, 2010). However these definitions do not appreciate the finer aspects of cross border alliances.

Cross border alliances have been defined by Parkhe (1991 as cited in Mittal, 2010) as a comparatively lasting inter-organizational collaborative interaction revolving around the transfer between borders that makes use of competencies and governance frameworks from autonomous entities present in two states, or more. These entities come together for the collective achievement of personal objectives associated with the business purpose of each organization in alliance (Mittal, 2010).

Literature on this particular field internationally revolves around volumes of inter-cultural variation between countries and the affect on corporate norm, practices and actions. Werner (2002 as cited in Mittal, 2010) in his literature review highlighted that the concerns related to culture contributed majorly in the entry mode concerns, global joint ventures, international exchange, FDI and internationalization of decisions. Thus factors specific to culture are important in facilitating inter-cultural collaboration. This is so because the success of the endeavor rests on the alliance between the two organizations (Mittal, 2010).

Inter-cultural collaborations when they are translated into client-vendor interactions have also acknowledged the significance of cultural components for an enduring and lasting inter-cultural relationship. This is so because cultural variation can have a substantial implication on the relationship's nature (Trent and Monczka 2003 as cited in Mittal, 2010) and ultimately affect the performance that is led by the respective relationship (Mittal, 2010).


Banerjee, a.V., and Duflo, E. 2000. "Reputation Effects and the Limits of Contracting: A Study of the Indian Software Industry," Quarterly Journal of Economics (115:3), pp. 989-1017. Taken from: Rai, a., Maruping, L.M. And Venkatesh, V. (2009). OFFSHORE INFORMATION SYSTEMS PROJECT SUCCESS: THE ROLE of SOCIAL EMBEDDEDNESS and CULTURALCHARACTERISTICS. MIS Quarterly Vol. 33…

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