Journal article

Controls as Exit Barriers in Multiperiod Outsourcing Arrangements

Yee Shih Phua, Margaret A Abernethy, Anne M Lillis

Accounting Review | AMER ACCOUNTING ASSOC | Published : 2011


This study explores how initial control choice influences the ease with which outsourcing firms switch suppliers. We recognize that firms invest in controls to manage collaborative relationships, and argue that these investments generate switching costs, namely, opportunity and reinvestment costs. We collect data on outsourcing transactions by conducting semi-structured interviews across multiple field sites. Observed patterns across 53 cases show that firms with trust-based controls experience the most difficulty in switching suppliers, whereas firms with market-based controls experience the greatest ease. Firms with bureaucratic-based and hybrid controls generally lie between these extreme..

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