Diffusion of Information Technology Outsourcing: Influence Sources and the Kodak Effect

The governance of an organizational information technology (IT) infrastructure is steadily shifting away from pure hierarchical and market mechanisms toward hybrid and partnership modes that involve external vendors. In particular, IT outsourcing has recently emerged as a significant administrative innovation in an organization's IT strategy. This paper seeks to explore the sources of influence in the adoption of this innovation. For this purpose, we generated a comprehensive sample of outsourcing contracts in the US using an electronic bibliometric search process. Using diffusion modeling, our empirical analysis shows that the adoption of IT outsourcing is motivated more by internal influence (or imitative behavior) than by external influence amongst the user organizations. Subsequently, we considered the widely publicized Eastman Kodak's outsourcing decision as a critical event to assess whether this internal influence is more pronounced in the post-Kodak regime than in the pre-Kodak regime. Our results show that internal influence is dominant in the post-Kodak regime but not in the pre-Kodak regime. Implications and directions for future research are discussed.