Agency theory has served as a primary basis for
identifying drivers of offshore information system project success.
Consequently, the role of relational factors in driving project
success has been overlooked in this literature. In this paper, we
address this gap by integrating the social embeddedness
perspective and the culture literature to theorize how and
why relational factors affect the success of offshore IS projects
that are strategic in nature, and to identify organizational and
interpersonal cultural differences as critical success factors in
this context. Using data from a longitudinal field study of 155
offshore IS projects managed by 22 project leaders, we found
evidence of a relationship between hypothesized relational factors
and two measures of offshore IS project success—namely, project cost
overruns and client satisfaction—over and above the effects of
project characteristics and agency factors. Specifically, we found
that information exchange, joint problem-solving, and trust reduce
project cost overruns and improve client satisfaction. We also found
a relationship between cultural differences at the organizational
and team level, and offshore IS project success. The model explained
40 percent and 41 percent of the variance in project cost overruns
and client satisfaction respectively for projects with a client
representative. For projects with no client representative, the
model explained 35 percent and 37 percent of the variance in project
cost overruns and client satisfaction respectively. Collectively,
the results have important theoretical and practical implications
for how client– vendor relationships should be managed when
partnering with offshore firms and designing offshore IS project
teams.
Keywords:
Offshoring, social embeddedness, project management, agency
theory, culture, multilevel