Offshore Information Systems Project Success : The Role of Social Embeddedness and Cultural Characteristics

Agency theory has played a significant role in identifying drivers of offshore information system (IS) project success. Consequently, the role of relational factors in driving project success has been overlooked in this literature. In this paper, we integrate the social embeddedness perspective and the culture literature by theorizing how and why relational factors affect the success of offshore IS projects that are strategic in nature, and by identifying 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% and 41% 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% and 37% 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