Does IT outsourcing create firm value?

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Does IT outsourcing create firm value?

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Special Interest Group on Computer Personnel Research Annual Conference archive
Proceedings of the 2007 ACM SIGMIS CPR conference on Computer personnel research: The global information technology workforce table of contents

St. Louis, Missouri, USA

SESSION: IT economy and policy table of contents

Pages: 87 - 91

Year of Publication: 2007

ISBN:978-1-59593-641-7

Authors

Christine Koh	Nanyang Technological University, Singapore
Soon Ang	Nanyang Technological University, Singapore
Gillian Yeo	Nanyang Technological University, Singapore

Sponsors

ACM: Association for Computing Machinery
SIGMIS: ACM Special Interest Group on Management Information Systems

Publisher

ACM New York, NY, USA

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ABSTRACT

The continued growth of IT outsourcing seems to reflect a fundamental belief among businesses that outsourcing creates wealth and delivers value to companies that outsource. Such a belief is supported by theories of production and transaction cost economies. These theories suggest that IT outsourcing should indeed generate greater wealth and create greater value for firms that outsource vis-à-vis firms that prefer to manage and operate their IT in-house. Yet, to date, there is little objective evidence to show how IT outsourcing actually does create value to companies. Drawing on transaction and production cost economies, we argue that IT outsourcing should create value for firms. We test our hypothesis using an event study of 420 IT outsourcing announcements by U.S. public listed companies during the period 1989-1999. Results showed that IT outsourcing did create value for firms in terms of positive short-term stock market returns.

REFERENCES

Note: OCR errors may be found in this Reference List extracted from the full text article. ACM has opted to expose the complete List rather than only correct and linked references.

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