On Buyer Selection of Service Providers in Online Outsourcing Platforms for IT Services
Authors: Hong, Yili; Pavlou, Paul A.
Journal: Information Systems Research (2017)
<jats:p> The Internet has presumably created a level playing field that allows any service provider across the globe to compete for contracts on online outsourcing platforms for information technology (IT) services. In this paper, we empirically examine (a) how country (language, time zone, cultural) differences and the country’s IT development affect buyers’ selection of service providers in online outsourcing platforms; and (b) how the reputation of service providers moderates the proposed effects of country differences and the country’s IT development. We integrated a unique data set formed by a sample of 11,541 software development projects from an online outsourcing platform matched with archival sources on the language, time zone, culture, and IT development of countries. Since price is typically endogenous in any supply demand system, we used the exogenous variation of the normalized exchange rate of the currency among countries, as a “cost-shifter” type instrumental variable (IV) for econometric identification. Our panel data analyses results (both with and without IV) show that buyers are negatively affected by country differences in terms of language, time zone, and cult…