Operational Capability Development in Vendor Internationalization:The Case of China’s IT Service Industry

As China transforms itself towards a leading destination for global IT outsourcing, major Chinese IT vendors increasingly face the challenge of effectively servicing three major client bases with different institutional, cultural, and economic backgrounds: Asia especially Japan, the West, and China. Using China’s IT service industry in this transition phase as the research setting, this study investigates how IT service firms develop operational capabilities as they interact with clients from different countries and regions and expand into new markets. Through qualitative case studies of 12 leading China-based IT service vendors, this paper develops a theoretical model that conceptualizes firms’ capability development in their internationalization process. The findings elaborate how firms can strategically learn from outsourcing clients from diverse geographical markets to develop complementary operational capabilities.