Outsourcing brings changes to the social aspects of organisations, changes that affect the people or actors within it, and hence, referring back to Leavitt’s diamond, also the tasks it can complete. In human terms, IT management is not a unique process, indeed Fukuyama (1995) observed that ‘there is scarcely any form of economic activity, from running a dry-cleaning business to fabricating large-scale integrated circuits that does not require the social collaboration of human beings’ (p.6), a choice for outsourcing is no exception to this rule. Configurations chosen for
outsourcing (Willcocks et al., 2011) might bring about the loss of people, move them to the vendor organisation or lead to the acquisition of new human resources in either home or offshore locations (Willcocks and Griffiths, 2010). These moves of people each introducing a set of collaboration challenges which have been explored in the outsourcing literature (eg. Rottman, 2008a, Zimmermann and Ravishankar, 2014, Willcocks and Kern, 1998). The outsourcing transition, moving from an integrated
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organisation to one where outsourcing is present, is therefore a time in which the organisation must change a range of practices, social as well as technical, to accommodate close working with the vendor (Willcocks and Griffiths, 2010). This change applies not only to the ways of the client organisation that makes the choice to outsource, but also to those parts of the vendor organisation that must co-operate with the new client. Cohen and Prusak (2001) articulate a concern that such change
activities might have too narrow a focus on only the ‘people, process and technology’ aspects of organisational effectiveness. They state ‘…we firmly believe that all of these notions leave out the essential connections among people without which purposive co-operative work cannot happen’ (p.8) and go on to propose that
combining organisations with different cultures depends as much on ‘social capital’ issues as on those of a strategic or technical nature. Therefore, to use a combination of two organisations in an outsourcing configuration to achieve goals like quality increase, cost reduction or knowledge gain would require management attention towards the social as well as technical aspects of change.
Social capital theory offers a way of understanding and planning an organisation’s approach to the changes outsourcing might typically require. It has been proposed as a lens to use for analysing the different phases of an IT outsourcing project (George et al., 2014). However, by shifting the unit of analysis from the relatively short
outsourcing transition to the full duration of the project, social capital theory has also been used to offer a way of understanding the more profound effects of outsourcing on the performance of an organisation’s information systems. (Research that has done this will be reviewed in detail later in this chapter).
The conceptual origins of social capital theory can be traced back to the early decades of the 20th century but after the 1970s it attracted more significant academic attention (Cohen and Prusak, 2001). Bourdieu (1986) proposed how capital, in three different forms; economic, cultural and social, constrains the outcomes that can be expected from action. The accumulations of these forms of capital, he writes, ‘makes the game of society – not least the economic game – something other than simple games of chance offering at every moment the possibility of a miracle’ (p.46). Capital thus imposes a set of constraints on the world, ‘which govern its functioning in a durable way, determining the chances of success for practices’ (p.46). Social capital, in Bourdieu’s view, can be used to influence a specific set of constraints on action,
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constraints amenable to influence both by the power of obligations held by members of a social network and the power of those members. This suggests that while social capital arises as individuals accumulate obligations over time, its influence can be exerted by other individuals, who do not possess those obligations themselves but who have accredited access to their network members who do. Social capital, while essentially an asset that is held by an individual, is one that can be invested through a network to achieve another individual’s goals.
Social capital is an intangible resource that organisations or individuals use to achieve their ends, indeed its presence is essential for specific ends to be achieved (Coleman, 1988). Coleman argues that social capital, in combination with organisational assets, allows different individual or system level outcomes than the assets alone could create. Examples of this can be found in other literature. For example, social capital can bind the members of a social group, supporting them with information, influence and solidarity that come as a consequence of their membership of that group (Kwon and Adler, 2014). Also, organisations like commercial firms or other bodies that have a defined and narrow purpose, as opposed to more emergent structures in wider society, can purposively manage social assets and social capital for the achievement of their specific goals (Spender, 1996). Finally there is an empirical relationship
between the asset component of social capital and the network component, the higher the value of the asset the more effective the network is in transferring it between members of the social group (Kang and Kim, 2013).
Both Bourdieu and Coleman approached social capital from a sociological perspective, specifically examining its influence over educational outcomes. Nahapiet and Ghoshal (1998) examined the role of social capital in organisations, specifically its influence over the creation of intellectual capital and thus organisational advantage. Their definition of social capital was ‘the sum of the actual and potential resources embedded within, available through, and derived from the network of relationships possessed by an individual or social unit’, (p.243). They propose that social capital increases efficiency of action and, by encouraging co-operative behaviour ‘facilitates the development of new forms of association and innovative organization’, (p.245) leading to the development of intellectual capital and thus advantage. This view of social capital as an organisational resource moves the concept from the area of sociology to that of strategic management, it forms a resource that, linking back to the
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view of Bourdieu, both constrains management action and determines chances of practical success. Nahapiet and Ghoshal proposed that social capital can be considered in three dimensions: structural, cognitive and relational.
The structural dimension includes the network of ties that exist between the human actors in the organisation, the configuration of those networks and their appropriability for different purposes. Ties vary in strength and emerge from relationships; friendship or repeated work related contact between individuals are common sources
(Granovetter, 1973). Ties may weaken or expire over time if they are not used (Nahapiet and Ghoshal, 1998) especially where the tie has been set up for purely instrumental reasons (Kwon and Adler, 2014). In networks of ties the concepts of brokerage and closure can be observed (Burt, 2005). Network brokers are individuals who use their exclusive ties or relationships of ties to develop more powerful positions within networks. The benefits of closure are seen when reinforcing links in the network create sanctions for positively monitoring or guiding behaviour (Coleman, 1988). While Coleman (1988) described how social capital could provide an individual with efficient access to information by building relationship links he did not examine how the quality of those links might affect this. Quality is captured more evidently in the cognitive dimension of social capital that was identified by Nahapiet and Ghoshal (1998). They described this cognitive dimension in terms of a set of intangible resources that drive common conceptual understanding across a community and emerge from the context that the community shares. Shared experience and specific forms of language were examples of these resources. Nahapiet and Ghoshal (1998 p.253) propose that to achieve the ‘meaningful’ communication that can lead to innovation the communicating parties must share context to some degree.
The relational dimension of social capital describes the atmosphere in which these networks and ties exist (Nahapiet and Ghoshal, 1998). Relational social capital is characterised by factors of trust, identification, the presence of behavioural norms and the exchange and existence of obligations over a period of time. Trust has been defined in different ways. It is ‘the expectation that arises within a community of
regular, honest and co-operative behaviour, based on commonly shared norms, on the part of other members of that community’ (Fukuyama, 1995, p.26). It is needed when a relationship outcome is uncertain, when one party must commit to the relationship
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without assurance of how the counterpart will act (Burt, 2005). Nahapiet and Ghoshal (1998) argue that ‘trust may both open up access to people for the exchange of
intellectual capital…and increase anticipation of value through such exchanges’
(p.254-5), suggesting that trust can play an enabling role in new knowledge generation and thus innovation. Established norms of behaviour therefore create trust, anchor expectations of response in an otherwise uncertain situation and therefore allow knowledge transfer and thus innovation. Repetition of ties between individuals and organisations over a period of time can also help trust to build (Gulati, 1995). Trust has be defined in a range of different ways (Das and Teng, 2004) showing how it conceptually overlaps with notions of control and perceptions of risk in relationships between businesses. A distinction in these definitions relevant to outsourcing is that between ‘competence trust’ and ‘goodwill trust’ (Das and Teng, 2001). The former describes the trusting party’s confidence that its partner offers ‘a high probability of getting things accomplished successfully’ (p. 258) while the latter helps the trusting party to believe that ‘partner firms will cooperate in good faith, rather than behave opportunistically (p.256). Both of these would seem to play a part in an environment where intellectual capital might be created; competence trust allows the parties to recognise each others’ ability, goodwill trust allows them to co-operate. These relationships were empirically examined by Kang and Hau (2014) who demonstrated how factors of trust in individuals, recognition of their expertise and the strength of ties between them all positively influenced knowledge transfer.
Identification is the recognition and acceptance by individuals that they belong to a group. Nahapiet and Ghoshal propose that it can be seen as a resource that influences individuals’ motivation to contribute to innovation process and their anticipation of value from these processes. Obligations are a manifestation of trust, created when one person does something for another; in the future that person could expect the favour to be returned (Coleman, 1988). Obligations build up in all social networks, they vary in strength and longevity and will be affected by the presence of payment or other financial incentives. However, as these factors essentially operate at an individual level there may be a problem of aggregation when applying this relational dimension of social capital to organisations (Kwon and Adler, 2014).
A deeper understanding of the changes in underlying social capital that it creates could offer insight into how outsourcing affects an organisation’s knowledge creation
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processes that underpin its competence in innovation. To prepare for this, the next section will review relevant literature in the field of organisational knowledge
development.