Research on outsourcing governance has focused on two modes: arm?s length governance based on a formal contract, and relational governance based on a psychological contract between the vendor?s relationship manager and the client?s project manager. Here, we show that the formal contract constitutes the basis for the formation of relational governance. Three factors, client flexibility, client?s process knowledge, and vendor?s process knowledge, affect the quality of the contract, shaping the outsourcing relationship and contributing to BPO performance.
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Research on outsourcing governance has focused on two modes: arm?s length governance based on a formal contract, and relational governance based on a psychological contract between the vendor?s relationship manager and the client?s project manager. Here, we show that the formal contract constitutes the basis for the formation of relational governance. Three factors, client flexibility, client?s process knowledge, and vendor?s process knowledge, affect the quality of the contract, shaping the out...
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