European Management Journal (2011) 29, 11 24

journal homepage: www.elsevier.com/locate/emj

Determining quality of business-to-business relationships: A study of Indian IT-enabled service providers

Somnath Lahiri
a

a,*

, Ben L. Kedia

Department of Management and Quantitative Methods, 232 College of Business, Illinois State University, Normal, IL 61790, USA b Robert Wang Center for International Business Education and Research, The University of Memphis, Memphis, TN 38152, USA

KEYWORDS IT-enabled services; Global sourcing; Relationship quality; Providers; India

Summary

What factors determine quality of inter-rm relationships involving cross-border sourcing of information-technology enabled services (ITES)? This paper addresses this heretofore underexamined question by drawing on the relationship-focused and global sourcing literature and employing a multi-method research technique. Analysis of qualitative and quantitative data collected from the top executives of Indian ITES industry suggest that perceptual evaluation of (i) three intangible rm assets (employee, organization, and management-related), and (ii) recent rm performance positively impact relationship quality. Based on the empirical ndings we discuss implications for theory and practice and provide directions for future research. 2010 Elsevier Ltd. All rights reserved.

If you want to go fast, go alone. If you want to go far, go together African proverb

Introduction
Over decades the dynamics of business-to-business (B2B) relationships have generated a signicant amount of theoretical and empirical scrutiny by scholars from multiple disciplines including marketing, management, and information
* Corresponding author. Tel.: +1 309 438 8452; fax: +1 309 438 8201. E-mail address: slahiri@ilstu.edu (S. Lahiri).

systems. This body of research suggests that collaborating business partners need to develop and maintain strong relationships in order to realize long-term, valuable outcomes (Hagedoorn, 2006; Ireland et al., 2002; Lado et al., 2008). Relationship quality (RQ) referring to partners overall evaluation of ongoing business relationships has been suggested to be a critical factor in determining strength and continuity of inter-rm relationships and subsequent business success (Liu et al., 2010; Rauyruen and Miller, 2007; Woo and Ennew, 2004). In the quest of conceptualizing the inherent nature of RQ, numerous studies have been conducted utilizing a wide variety of business settings. Although diverse ndings emanating from such research endeavors

0263-2373/$ - see front matter 2010 Elsevier Ltd. All rights reserved. doi:10.1016/j.emj.2010.08.003

12 highlight RQs importance from academic and practical standpoints, the issue relating to what factors determine RQ remains largely inconclusive and, therefore, continues to merit signicant scholarly attention and executive inquiry (Athanasopoulou, 2009; Holmlund, 2008; Woo and Ennew, 2004). Previous studies of RQ have examined contexts that are either national or international in scope. Understanding RQ in the latter is far more complex owing to geographic, cultural and temporal distance between business partners (Grifth, 2002; Leonidou et al., 2006). A particular context that has not been investigated from RQ perspective so far is that of information technology (IT) based global sourcing of services. Partners in IT-based global sourcing involve client rms (buyers or customers) from primarily developed nations that source (i.e., buy) services from expert providers (sellers or vendors) residing in relatively low cost destinations in the developing economies of the world (Bhatnagar, 2007; Kedia and Lahiri, 2007). Given that IT-based services sourcing is widely practiced by rms across the globe and its usage is estimated to grow manifold in the near future (Kotabe and Mudambi, 2009; Lacity et al., 2008), a useful way to contribute to and extend B2B relationship and RQbased literature is to understand the nature of relationships that are created and maintained between such sourcing partners. A question that has become worthy of attention is: what factors determine quality of relationship between business partners engaged in IT-based global sourcing of services? More precisely, what are the determinants of RQ involving relationships between clients and providers engaged in IT-based global sourcing of services? In addressing this crucial research question, the purpose of this paper is to ascertain how executives of provider rms perceive the importance of relationships that they maintain with their clients, and what factors seem to determine quality of such relationships. Providers involved in IT-based sourcing execute and deliver services to their clients based on specic contractual requirements of the latter (Kotabe and Mudambi, 2009). ITES (IT-enabled services, in short) include software development and maintenance, outsourced business functions and processes, and a wide range of back-ofce operations including customer services that can be transacted (i.e., ordered, processed and delivered) through use of IT, primarily the internet (Bhalla et al., 2008). Recent data suggests that sourcing of ITES is set to enhance in the recent future. For example, according to Lacity et al. (2008, p. 21) the market for global business process outsourcing (BPO, the largest constituent of ITES today) expenditure is likely to grow to $350 billion by 2010. Focusing on ITES relationships is, therefore, not only interesting but also very timely from research as well as managerial standpoints. In contributing to extant scholarship, our rationale for examining the context of providers is twofold. First, previous research on B2B relationship has focused mostly on buyers (customers) and has, in the process, overlooked the suppliers (Athanasopoulou, 2009; Liu et al., 2010). As a result, conceptualizing inter-rm relationship has remained rather a one-sided endeavor. In particular, such neglect of the providers has been signicant in the area of ITES (Kotabe and Mudambi, 2009; Parkhe, 2007). Second, providers take management responsibility and risks of services that

S. Lahiri, B.L. Kedia they execute and deliver for their clients. Specically, successful execution of services at the providers end translates into business success on the clients side. Therefore, analyzing the providers is necessary not only to learn what they perceive about business relationships but to also understand how such perceptions might inuence development and sustenance of long-term business relationships with clients (Bharadwaj and Saxena, 2009; Shi, 2007). Prior literature has variously referred to RQ as inherent nature of cooperative arrangements, health of ongoing relationships, or assessments of various relationship attributes (Holmlund, 2008; Woo and Ennew, 2004). In this paper, RQ is dened as cognitive evaluation of various attributes of inter-rm relationships that ITES providers develop and maintain with their global clientele. The research methodology that we adopt involves analysis of qualitative (executive interview) data and quantitative (questionnaire survey) data obtained from the top managers of Indian ITES-BPO industry (Nasscom, 2007). This particular industry, although relatively new, has been growing at the rate of 35% per annum and is currently the sourcing destination of choice for numerous executives across the world (Economic Times, 2008). Providers in this industry have increased scale, scope, and sophistication of operations to serve sourcing requirements of their global clients engaged in a wide variety of industries (Ramachandran and Voleti, 2004; Zaheer et al., 2009). We discuss, using multi-method analysis, how relationships with clients are viewed by Indian managers and what factors determine their perceptions of RQ. In the next two sections, we provide theoretical background relating to RQ and highlight its importance in the context of ITES. Subsequently, we explicate details of our India-based eld interviews (numbering 31) and the resulting knowledge relating to the determinants of RQ. In the third section, we show and discuss results of rm-level data analysis (n = 105) that validates information obtained during the interviews. We conclude by discussing the studys various contributions and limitations, and suggesting avenues for future research. Our results (a) provide evidence that perceptions about rms valuable, intangible assets (employee, organization, and management-related) and recent performance determine RQ, and (b) generate implications bearing on the resource-based view of the rm (Barney, 1991).

Theoretical background
In the last two decades or so, RQ has been studied by several scholars involving a variety of transactions such as businessto-business, business-to-customer and salesman-to-customer (Bejou et al., 1996; Holmlund, 2008; Jap et al., 1999; Liu et al., 2010). Although different denitions exist, RQ generally refers to exchange partners evaluation or overall assessment of various relationship attributes. Widely examined as an important component of relationship marketing, RQs roots can be traced back to the work of Gummesson (1987) (c.f. Keating et al., 2003). In the context of B2B relationships, RQ has been suggested to bind partnering rms in a manner such that they are able to generate benecial outcomes that go beyond mere exchange of goods

Determining quality of business-to-business relationships or services for capital. Such benets include customer satisfaction, enhanced perception of fairness and justice, customer loyalty, relationship satisfaction, positive wordof-mouth, repeat transactions and business continuity. RQ, highlighting perceptions of quality or health of ongoing relationships, is regarded as a crucial factor for determining stability and continuity of inter-rm relationships since based on such perceptions partners decide on the extent of contribution towards either relationship enhancement or relationship dilution. Better perceptions of RQ would enrich partners satisfaction and commitment over time and motivate them to contribute higher towards relationship strength and continuity, while lower perceptions of RQ may generate opposite effects i.e., lesser willingness of partners to contribute towards relationship sustenance (Liu et al., 2010; Rauyruen and Miller, 2007). According to prior literature, perceptions of RQ render inter-rm relationships strength, durability, and valuable outcomes through development of several soft traits such as long-term orientation, reciprocity, trust, respect, commitment and risk sharing (Kale and Singh, 2009; Lado et al., 2008; Wu and Cavusgil, 2006). Precisely, better is the perceived quality of ongoing relationships, higher is the extent of development of positive attributes embedded within the relationships, and greater is the subsequent strength, stability, value creation and ultimate success associated with such relationships. But what are the critical antecedents of RQ? In addressing this question, scholars have examined several factors broadly partner-related and relationship attributes-related in their research. Studied variables in the rst category include seller expertise, business similarity, ethical behavior, orientation, service provider attributes, supplier size and reputation, extent of formalization and centralization within rms, goal congruity, perceived reseller market orientation, adaptive selling behavior, and relationship orientation of partners. Likewise, examined variables in the second category include relationship duration, power, dependence, switching costs, trust, fairness, and communication quality (cf. Athanasopoulou, 2009; Woo and Ennew, 2004). Although researchers differ in their conceptualization of RQ and its dimensions, there is general consensus on two counts. First, RQ is a higher order construct like service quality and product quality and, second, RQ is manifest in several distinct yet related constructs such as trust, commitment and satisfaction (Bejou et al., 1996; Jap et al., 1999; Rauyruen and Miller, 2007). While trust refers to partners belief that each would act in the best interest of the other and not resort to opportunism, commitment suggests partners motivation to stay with the existing relationships. Satisfaction signies partners perceptions of fulllment based on the matching of relationship-based outcomes with expectations. The lack of scholarly unanimity regarding factors that determine RQ is evident both in studies that focus on one country as well as those where business partners hail from different nations. In the latter category, for example, while De Wulf et al. (2001), dealing with a cross-country, crossindustry setting, found perceived relationship investment (composed of direct mail, preferential treatment, interpersonal communication, and tangible rewards) to be the direct antecedent of RQ, Leonidou et al. (2006), investigating US

13 industrial exporters and their overseas customers, conceptualized RQ using seven constructs (adaptation, commitment, communication, cooperation, satisfaction, trust and understanding) and found that uncertainty, distance, and conict play a negative role on RQ. While De Wulf et al. (2001) measured RQ in terms of relationship commitment, trust and relationship satisfaction, the study of Indian industries by Singh (2008) utilized a 16-item scale (consisting of relationship trust, relationship commitment and relationship satisfaction) and found that higher ability to bond different actors in network of rms is positively related to its RQ with customers. In observing the varied ndings in these studies and others, we cannot but agree with Holmlund (2008: 33) that it appears as if the relationship quality concept itself is still rather under-explored.

ITES and RQ
The research context that we examine in this study is unique. In spite of possessing the typical barriers geographic, cultural, and temporal associated with any cross-border partnership, relationships in ITES pose added complexities toward managerial perceptions and allied decision-making (Shi, 2007). This may be ascribed to the following reasons. First, ITES (in particular BPO) involves handing over of client organizations business process(es), in part or full, to specialist third party provider(s) as opposed to discreet organizational activities that are relatively straightforward to handle. Second, ITES contracts require quick turnarounds, utmost precision in production and delivery, and high levels of data security measures. Third, such projects tend to be continuous in nature involving longer time-frames and relatively higher revenue than do projects in traditional sourcing (Budhwar et al., 2006; Graf and Mudambi, 2005). Overcoming these complexities require greater efforts on the part of top managers involved in the initiation and sustenance of such cooperative arrangements. Particularly for the providers ITES relationships assume tremendous signicance since through the services they help realize the raison detre for the clients global sourcing moves. Within the stream of RQ studies involving partners in a cross-border setting, there has not been systematic study of the IT-based global sourcing providers. Having explained the background of this research, we discuss, in the next section, the rst part of our multi-method research.

Methodology
Executive interview
Executive interviews, though costly and time-consuming, allow for collection of extensive qualitative data that is typically not possible though survey administration or use of objective information (Alvesson, 2003). To begin our research, a list of Indian ITES providers was prepared by accessing several online resources such as www.nasscom. org and www.bpoindia.org. Preliminary information e.g., company address, contact information, number of employees, and types of services provided was obtained from the above websites. Over a period of about four months, a research team

14 (co-authors) met and interviewed 46 senior business executives in 31 provider rms located in the Indian cities of Bangalore, Kolkata, and Hyderabad. The rms were selected at random from the prepared list. The interviews, conducted in English language, were face-to-face, in-depth, semi-structured and held in the ofces of the executives. To ensure that same set of questions were repeated in each session, we utilized an interview guide as a check-list containing several open-ended questions. However, relevant other questions were also asked depending on the spontaneity of discussions. Except in two cases all the other 29 interviews involved multiple informants (two or three). 17 (out of 31) rms had ofces (delivery centers) in multiple locations in India and 26 rms had ofces abroad (onsite presence), primarily in the US and few in U.K or other parts of Europe. Because of the sensitive nature of ITES operations and data security measures adhered to by most providers, we could not tape record the conversations. With the permission of executives, we took hand-written running notes for each interview. Table 1 highlights the salient features of eld interviews including demographics of the interviewees. Owing to condentiality issues we cannot provide names of companies or the interviewed executives. The interview data was analyzed in three steps. First, the hand-written notes were made fair by typing all the responses provided by each executive. These printed interview transcripts were scrutinized and cross-checked by both members of the research team. In case there was more than one interviewee in a company, the information provided by one was matched with those provided by the other(s) in order to note for overlaps and/or discrepancies, if any. These were later added (i.e., supplemented) to result in an aggregate report for each company. Second, each of the 31 transcripts was content analyzed with the objective of creating a list of predictors of RQ and to assess executives perceptions about the importance of relationships. For this, line-by-line exploration of the transcripts was done independently by the researchers. The

S. Lahiri, B.L. Kedia emerged themes were noted, cross-checked, and indexed by creating tables for each company. Third, company-wise ndings were compared with one another and a nal document was prepared based on clustering of common themes that evolved from the reports. The ndings, resulting from our work-intensive, iterative rening process of interpreting executive responses, were discussed with two business professors and two industry experts to ensure that our framework and interpretations were meaningful and accurate.

Importance of relationships
All the interviewed executives repeatedly stressed that relationships are critical for their business commencement, continuity and survival, and that they constantly remain in search of avenues of improving and surpassing quality of their ongoing partnerships. Their overseas clients, mostly from the US but also from Europe, and parts of Australia and Asia, desire that the contractual stipulations (as noted in service level agreements) are met without fail and the ongoing projects are completed within time and cost parameters while maintaining the desired service quality and data security measures. Above all, what most clients seek, according to the interviewees, are business partners who are not only reputed and possess strong credentials, but are also committed, trustworthy, and dependable in the long run. The interviewees also reported that they seek active cooperation of their clients in transferring and executing the outsourced business processes. Essentially, they like to ensure that their clients assist them right from contract preparation stage through project transition till the time the nal bills are cleared. Almost all the executives mentioned that they are keen on developing and continuing relationships that are based on trust and respect, commitment, risk sharing and joint problem solving and which would lead to mutual value creation on a sustained basis.

Table 1 1. 2. 3. 4.

Summary of ITES executive interviews. Bangalore (28), Kolkata (2), Hyderabad (1) Total = 31 interviews 1.50 h (average) Total 46 (male = 42: female = 4) Chief Executive Ofcer, Chief Operating Ofcer, Chief Delivery ofcer, General Manager, Manager (Human Resources), Manager (Administration), Senior Business Consultant, Senior Manager (Compliance), Vice President (Operations), Deputy General Manager (Solution Design and Transition), Manager (Human Resources), Vice President Global Marketing 1710 000 (range) 17 years (range) Capital market, insurance, health care and life-sciences, banking, telecom, engineering, transportation and services, automotive and aerospace, entertainment, utilities 120 (range) 240 (range)

Interview location (Indian cities) Interview duration Number of interviewees Interviewee designations

5. 6. 7.

Firm employee strength Firm ITES experience Served industries

8. 9.

Number of clients (partnered at a time) Number of ongoing relationships (simultaneous)

Determining quality of business-to-business relationships Such partnership attributes assume signicance as providers interact with clients mostly electronically and there is hardly any scope of face-to-face meeting unless clients plan specic site-visits or project-level managers attend clients overseas ofce for denite reasons. The executives made it clear to us that so long their business outcomes match various expectations they possess at the start of partnerships (and those that arise during currency of contracts) they feel satised interacting with their clients and are willing to consider their relationships as benecial, successful, and worth continuing. A common understanding that came across in the interviews is that it is better to focus on relatively fewer clients and serve their sourcing needs well than partner with multiple clients and failing to deliver the best. Owing to repeat business transactions, most providers are well aware of the expectations typically nurtured by their diverse clientele and a set of matched expectations have evolved over time that both parties recognize and attempt to fulll. An interviewee, a Vice President (operations), had to say to us: All our clients know what to expect from us. They dont have to tell us anymore. We know them very well. . .. . .we have executed so many different projects. . . In fact, we often tell our clients what more they should expect from us. . .we have so much more to offer. . .. they see us as associates, not vendors. Most of the executives suggested that we visit their companys website for greater information on areas that could not be covered during interviews. To gather greater information, we visited each companys website and also reviewed relevant but limited literature on ITES relationships (e.g., Graf and Mudambi, 2005; Kedia and Lahiri, 2007; Ramachandran and Voleti, 2004; Shi, 2007). By juxtaposing (a) ndings emanating from content analysis of interview data, (b) knowledge gained from company websites, and (c) insights obtained from review of relevant literature, we identied four determinants of RQ. Table 2 highlights the role played by each antecedent in determining RQ.

15 relating to RQ. Below we elaborate on the role played by various determinants of RQ.

Knowledge, skills and abilities (KSA)

KSA of employees, particularly project-level personnel, help providers to conceptualize different business processes that are planned to be transferred or have been transferred, and execute these processes in a manner that satisfy clients with regard to quality, timeliness, and security aspects. Such services not only require thorough understanding of the business processes but also necessitate possession of overall knowledge of how the processes t into clients business operations. KSA contribute to relationships in several ways. First, knowledge arising from employees formal education enhances their analytical, technical, and language prociency. Second, skills developed from job-related knowhow and relevant work-experience aid efcient project execution through individual and team efforts. Third, abilities resulting from employees on-site and of-site training relating to quality, defect elimination and security issues help to better understand clients business interests and sourcing needs, and enable project leaders to make informed decisions based on real-time feedback. Finally, combination of knowledge, skills and abilities act as a crucial source of innovative business ideas that allow providers to better their service standards year-on-year. Presence of high KSA was perceived by the interviewed executives as being a precursor to effective contributions towards the ongoing relationships with the clients. Such perceptions lead to consequent positive cognitive evaluation of relationship attributes (i.e., RQ). The executives strongly felt that trust, commitment, risk sharing behavior etc. relating to the ongoing relationships were the manifestation of the quality of KSA residing within the human actors. To sum up on the quality of KSA, one interviewee a Bangalorebased senior HR manager shared with us his US-based client managers comment: We come to you not because your ngers run fast on the computer keyboard but because your brains run even faster.

Determinants of RQ
Although the Indian provider rms that we visited served a wide range of industries (as shown in Table 1) and, therefore, executed a variety of services that differed in scope and complexity, three aspects struck common chord in all the interviews. First, creating, developing and maintaining stable relationship with the existing clients was foremost in the mind of executives. Second, sustaining quality relationships was intricately related to the cognitive evaluation of various attributes of the ongoing relationships. Third, assessment of relationships depended on the perceived quality of different internal assets possessed by the providers primarily, (a) human-related such as knowledge, skills and abilities, (b) organization-related such as databases, processes, norms, and culture, and (c) management-related capability. In addition, overall performance that a rm had generated in the recent past also inuenced perceptions

Databases, norms, processes, culture (DNPC)

The second factor affecting RQ are assets relating to DNPC that are developed and maintained within the organization. Various project-related databases, documents, manuals, management guidelines and checklists are generated during the course of contact executions for various clients that serve as sources of valuable information for current or succeeding contracts. The learning that takes place at the organizational level through feedback (positive and/or negative) from clients during project- executions also serve as repositories of useful knowledge that help in contract handling both ongoing and future. Such learning, in particular, tends to serve as organizational routines and enable providers to better satisfy the clients requirements through developing effective processes and systems. Moreover, accumulating learning helps in developing organization-wide norms that stresses efcient

16
Table 2 Determinants of RQ in ITES.
Contribution to ongoing relationships Recognition and appreciation of clients business philosophy, operations, work culture, and sourcing needs Conceptualization and efcient execution of transferred processes Retention and utilization of domain specic expertise and learning obtained from executing similar processes Understanding and respect for reliability, responsiveness, quality assurance and honesty in all executions Explicit sharing of information, expectations, and work related concerns during site-visits and/or IT-enabled interactions Development of innovative ideas for bettering service standards Development of embedded knowledge source for current or succeeding contracts Simplication of complexities associated with clients business processes Efcient monitoring of process qualities and compliance with international process standards Renement of existing processes and systems through developed organizational routines and norms Identication and usage of opportunities to create newer services and/or work practices Development of quality enhancing training programs, precisely dened specications and performance metrics Efcient utilization, monitoring, control and retention of various resources and capabilities within cost, quality, security, and time parameters as set forth in contracts Successful business collaboration (transition, management, and execution) through different geographic locations, time-zones, and languages Efcient handling of changes related to business demands and on-going project requirements Efcient responding to clients xed or changing contractual needs Dealing with domestic and international project demands with equal efciency Transmittal, handling, and storage of business information through condentiality and security Development of exibility to accommodate changes related to work scope, price, and delivery schedules Indicative of the extent of efcient asset utilization in fullling various business expectations and relational requirements Financial performance is suggestive of the soundness of revenue and prot generation needed to keep the business running and enabling necessary developmental investments Non-nancial performance signals that business is well poised on non-monetary aspects (e.g., increase in international markets) needed for future business viability and growth, and maintaining high quality relationships with clients Effect on RQ Extent of contribution from KSA impacts cognitive evaluation of various relationship attributes: higher contribution resulting in positive evaluations

S. Lahiri, B.L. Kedia

Determinant Human-related assets (KSA)

Exemplar executive quotations . . .typically much of the client-vendor relationships are a function of developing and using dedicated project teams with right skill sets

Organizationrelated assets (DNPC)

Extent of contribution from DNPC impacts cognitive evaluation of various relationship attributes: higher contribution resulting in positive evaluations

Our unique systems and processes make us dependable in the clients eyes. . ..business continuity and relationship stability stems from how we draw from knowledge pool developed since late 90s

Managementrelated capability (MRC)

Extent of contribution from MRC impacts cognitive evaluation of various relationship attributes: higher contribution resulting in positive evaluations

As long as we are able to synergistically utilize our unique assets to maximize value for our clients, we remain condent of maintaining stable relationships with them.

Recent rm performance (RFP)

Extent of contribution from RFP impacts cognitive evaluation of various relationship attributes: higher contribution resulting in positive evaluations

. . .denitely contemplate higher margins and company growth year-on-year. Strong nancials and new businesses tell us that relationships with clients have been going well and as planned

Determining quality of business-to-business relationships practices, policies, and programs and allows providers to better their service standards over time. Strong culture for service quality that currently pervades the Indian software and ITES industries is used by the top executives to promote spirit of innovativeness in developing and providing new and superior services. On the whole, it appeared that providers use embedded knowledge arising from DNPC to (a) simplify complexities associated with clients business processes, (b) efciently monitor process qualities, (c) identify and use opportunities to create newer services and/or work practices, and (d) better utilize organizations problem-solving activities based on knowledge of what proved useful in prior projects. Like KSA, presence of effective DNPC was perceived by the executives as being a precursor to effective contributions towards the ongoing relationships with the clients. Such perceptions lead to consequent positive cognitive evaluation of relationship attributes (i.e., RQ). Discussing on the importance and contribution of DNPC, one executive commented: Over the last six years we have developed huge knowledge-base. . ..mature processes, platforms, tools, best practices and expertise across different industry verticals. . .. . ..leveraging these strengths allow us to efciently support and service clients anywhere in the world.

17 From process transition to nal delivery, we manage everything round the clock. . .it is all about how efciently you dedicate your assets... . ..business model, experience, technology, expertise, network etc. in different projects in order to provide best services and ultimate value to clients.

Recent rm performance (RFP)

Generating high rm performance is considered one of the top priorities of business executives. However, while strong performance indicates efcient utilization of assets in fullling various business expectations, it may not necessarily signify success of ongoing relationships (Kale and Singh, 2009; Lado et al., 2008). This begs the following question: if a provider has generated high RFP, will its top managers consider its existing client relationships more fullling vis-a-vis those executives whose rms managed to gain ` average or below-average RFP? Put differently, does RFP inuence cognitive assessment of ongoing inter-rm relationship attributes? If so, how? The current literature is not very clear on this aspect. One reason could be that most researchers tend to use rm performance as a dependent variable rather than using it in other ways to arrive at meaningful insights (March and Sutton, 1997). Although most interviewees claried that they look forward to high rm performance and enhancing its level every year, several managers stressed that they valued relationship depth and client satisfaction more than hard nancial outcomes. In fact, many of them rmly held the notion that such soft, non-nancial considerations would signicantly improve rm performance in the long run. Overall, it seemed that RFP positively inuenced perceptions about RQ. While strong nancial performance suggests that revenue and prot generation is sound enough to keep the business running and allow for necessary developmental investments, high non-nancial performance signals that business is well poised on non-monetary aspects (e.g., increase in international markets) that are needed for future business viability and growth, and maintaining high quality relationships with clients. In sum, our analysis of qualitative data suggests that executive perception of four factors human related KSA, organization-related DNPC, management-related MRC, and performance-related RFP determine RQ (Table 2). It is possible to represent our qualitative ndings mathematically as RQ = f (KSA, DNPC, MRC, RFP). The next section describes the second part of our research methodology the validation process.

Management-related capability (MRC)

Almost all the executives stressed the importance of managing the show by ensuring effective deployment and utilization of various assets controlled by them. Capabilities to do so require extensive project-related experience pertaining to suitable understanding of clients diverse expectations and simultaneously deciding on how to best utilize, monitor, control and retain various resources and capabilities at their disposal. Specically, what matters is the rms ability in integrating and supporting various resources and capabilities related to managing human resources, information systems, technology-related changes, multiple project requirements, and overall fullling of the clients varied contractual requirements. On the question of how MRC contributes to RQ, we came to understand that providers possessing strong management capability are able to efciently assemble and deploy various internal assets in executing valuable services within cost, quality, security, and time parameters as set forth in the contracts. Further, with strong MRC providers are also able to envision and act proactively to changes related to business demands and on-going project requirements, respond quickly and efciently to clients xed or changing needs, handle domestic and international project demands with equal efciency, and generate business interests from newer clients in overseas markets. Our interviews revealed that, like the two aforesaid assets, MRC contributes signicantly towards the relationships, and positive evaluation of relational attributes were the manifestation of the quality of MRC residing within the organization. Regarding the role of MRC, one Hyderabad-based interviewee mentioned:

Empirical validation
Questionnaire survey
Research in management holds that views of top managers reect collective perspective of the organizations they lead. Therefore, their perceptual evaluations are valued as reliable sources of rm-level data (Hambrick, 2007; Sutcliffe, 1994). A questionnaire survey was prepared to collect data from top executives of Indian ITES industry. The

18 survey, prepared in English language, was shown to academicians and practitioners who were conversant with the industry. The questionnaire items were drawn from similar items available in the extant literature. To facilitate executive response, the survey was uploaded on www.surveymonkey.com, the popular web based survey preparing tool. Top executives were notied by sending two waves of e-mails using subscriber mailing list provided by an ITES provider whose CEO had participated in one of the eld interviews. We also sent individual e-mails to the top executives of most ITES rms whose names appeared in relevant websites. In both cases we provided the electronic link for accessing the survey. Over a period of about four months, we obtained 211 responses. We retained only those that had (a) complete name, ofcial designation and e-mail address of the responding executive, and (b) where all questions had been responded so that there was no missing data. This two-way process of selection led to a nal sample of 105 responses.

S. Lahiri, B.L. Kedia following outcomes in the last two years. For measuring the other four variables, respondents were asked to indicate the extent to which they agreed with the statements mentioned in the questionnaire items. We also used two control variables in our analysis rm age (measured by subtracting the year of rm establishment from the year of current study) and rm size (natural logarithm of full time employees working for the rm). The validity of the responses were carried out using (a) random cross-check comparing preliminary information provided by the respondents (e.g., year of establishment, services provided and total number of employees) with similar information available on the individual rms websites and in www.bpoindia.org, (b) t-tests to check for signicant difference (p < .05) between respondents and non-respondents on several characteristics such as age, size, and types of services provided, and (c) comparisons of early and late respondents on the above variables. While the result was positive for (a), the difference observed in (b) and (c) was statistically non-signicant.

Item development
Prior research, particularly relating to RBV (Barney, 1991) and intellectual capital-based view of the rm (Edvinsson and Sullivan, 1996) have discussed and examined various intangible rm assets that can potentially result in superior rm performance. Primary among them have been the examination of human capital, organizational capital, social capital and various rm level capabilities (Desarbo et al., 2005; Kor and Mahoney, 2005; Subramanium and Youndt, 2005). Amongst other things, these assets have been argued to contribute to initiating, developing and continuing interrm partnerships. We operationalized KSA and DNPC by adapting the measures of human capital and organizational capital respectively earlier used by Subramaniam and Youndt (2005). MRC was operationalized using the adapted measure of management capabilities (Desarbo et al., 2005). RFP was measured based on Tan and Litscherts (1994) measure of rm performance and the dependent variable, RQ, was measured by adapting the measure of partnership quality as used in Lee and Kim (1999) and Lee (2001). All the measurement items (shown in Appendix A) involved 5-point Likert-type scales. To measure rm performance, respondents were asked to indicate your position with respect to your close competitors regarding the

Validity of measures
An exploratory factor analysis (EFA) with varimax rotation indicated that there were ve distinct factors with multiple items loading on their respective factors. The rotated factor loadings ranged from 0.590 to 0.912. Performing conrmatory factor analysis (CFA) using LISREL 8.51 (Joreskog and Sorbom, 1993) we observed that the com pletely standardized factor loadings, ranging from 0.50 to 0.95, were statistically signicant suggesting convergence of indicators with appropriate underlying factors. The indicator reliability of almost all the items was greater than 0.5 suggesting that the items reective of each construct were reliable. The average variance extracted (AVE) for all the measures was greater than 0.50 (range 0.530.75), thus conrming convergent validity (Fornell and Larcker, 1981). The internal consistency of measures and scale reliability, checked by calculating Cronbach alpha and composite reliability, were acceptable as all the values were found to be above the recommended threshold of 0.7 (Bagozzi and Yi, 1988). The result of CFA including model t statistics is included in Appendix A.

Table 3 Variable 1. 2. 3. 4. 5. 6. 7.

Descriptive statistics. Mean 5.51 5.79 3.94 3.91 4.25 4.03 3.64 SD 3.5 1.46 0.83 0.78 0.77 0.79 0.90 1 1.00 0.359 0.185 0.129 0.140 0.022 0.008 2 1.00 0.179 0.159 0.073 0.179 0.012 3 4 5 6 7

Firm age Firm size Human-related assets (KSA) Organization-related assets (DNPC) Management-related capability (MRC) Relationship quality (RQ) Recent rm performance (RFP)

1.00 0.288 0.224 0.191 0.392

1.00 0.128 0.163 0.321

1.00 0.285 .142

1.00 .224

1.00

All correlations greater than 0.30 are signicant at 0.05 level (2-tailed). KSA = knowledge, skills and abilities; DNPC = databases, norms, processes, culture.

Determining quality of business-to-business relationships Since measure of predictor and criterion variables were obtained from the same source (respondents), our methodology may be subjected to common method variance bias (CMV). To reduce magnitude of this concern, we utilized controls recommended by Podsakoff and colleagues (2003). Specically, we guaranteed (on the welcome page of questionnaire survey) total condentiality of participants responses. This reduced chances of responses that are socially desirable, lenient, and acquiescent. Further, we mentioned that there was no right or incorrect answer and requested the participants to respond honestly. This reduced evaluation apprehension that could have been in the executives minds. As part of statistical controls relating to CMV we used Harmans single-factor test. On running principle components factor analysis on the questionnaire items, we identied several factors (as opposed to one) and the rst factor did not account for the majority of the variance (only 22.028%). This result led us to preliminary conclude that common method bias is not a concern. In addition, we ran a CFA by entering all the items for our latent variables into a single factor and subsequently observed deterioration in model t characteristics (v2 = 1109.83, df = 98, p = 0.00, RMSEA = .15, GFI = .56, NFI = .71, NNFI = .73, CFI = .72, AGFI = .78). This suggested that biasing from CMV is unlikely. Further, following Podsakoff et al. (2003) we allowed the survey items to load on their theoretical constructs as well as on a latent common method variance factor and compared the signicance of the structural parameters both with and without the additional factor in the model. We did not nd any difference and, therefore, concluded that CMV is not a concern in our study. Overall, we found our multi-item measures to be unidimensional, valid, reliable, and acceptable, and that the ve-factor model tted the data well.

19 To determine the impact of the independent variables (KSA, DNPC, MRC and RFP) on the dependent variable (RQ) we used ordinary least square regression (OLS) analysis. The result of regression analysis is shown in Table 4. All variance ination factors (VIFs) in the model were well below 10 suggesting multicollinearity is not a serious problem in our analysis. The adjusted R2 value for the model is 0.414 indicating that the control and independent variables explain 41.4% of the variance in RQ. The positive and statistically signicant regression (beta) coefcients for the relationship between the independent variables and RQ suggest that KSA (b = 0.283, p < 0.05), DNPC (b = 0.348, p < 0.001) and MRC (b = 0.313, p < 0.001) are positively associated with RQ and are its signicant predictors. Recent rm performance (b = .154, p < 0.05) also has positive and signicant association with RQ. By far organization-related assets (DNPC) have the maximum impact followed by that of managementrelated capability (MRC) and human-related assets (KSA). These results conrm what we learned during the interviews about the positive inuence of intangible rm assets and rm performance on RQ (Table 2). Although we found signicant inuence of the four determinants, it was little surprising to nd the relatively least impact of KSA on RQ given that most clients consider global sourcing primarily to take advantage of high quality manpower possessed by the providers (Kedia and Mukherjee, 2009; Manning et al., 2008). It appears that top managers of ITES industry consider (a) available pool of intangible assets embedded in databases, norms, processes, culture (DNPC), and (b) how they manage deployment and utilization of various resources and capabilities (MRC) to be more important (than KSA) in the development of perceptions about the nature of ongoing relationships. One probable explanation for this nding may be high employee turnover in the ITES industry (Budhwar et al., 2006; Sarkar, 2009). Most top managers, particularly those in charge of human resources, remain extremely busy selecting, training and developing new manpower to replace employees who quit.2 They probably feel that their repository of KSA at any given time may be adequate (quality-wise) to meet various expectations through efcient performance of project-related tasks but such KSA do not contribute to the development of RQ to the extent that DNPC and MRC does. Probably the latter two are considered more stable and embedded within the rm than human-related assets which is more mobile and easily transferable. The impact of RFP is also interesting and suggests that perceptions of recent rm performance do positively inuence assessment of ongoing relationship attributes. In other words, higher rm performance urge service providers to contribute positively towards their relationships overall strength and continuity such that the ongoing relationships continue to generate valued outcomes (enhanced client sat-

Results
The descriptive statistics of the variables used in the analysis are shown in Table 3.

Table 4 RQ.

OLS model of the effects of factors determining Standardized regression (beta) coefcient 0.156* 0.171** 0.283** 0.348*** 0.313*** 0.154** 0.438 0.414 13.666*** 105
***p

Independent variables Firm age Firm size KSA DNPC MRC RFP R2 Adjusted R2 F N

Signicance levels: *p < 0.10, **p < 0.05,

< 0.001.

2 The General Manager (Employee Branding and Communications) of a top ranking ITES provider who participated in one of the interviews informed that he was responsible for hiring 2500 employees per month and was required to travel 34 days a week.

20 isfaction, loyalty, reputation etc.) that they (providers) expect.

S. Lahiri, B.L. Kedia Since not much research has focused on relationship dynamics relating to this context, our discussion and ndings add to the extant literature by incorporating executive perceptions relating to (a) importance of relationships and (b) predictors of RQ. Since inter-rm relationships form an integral component of global sourcing success (Bozarth et al., 1998), our discussion and empirical ndings facilitate better understanding of such relationships. Given that numerous rms across the globe source knowledge-based services from providers operating in distant lands including several emerging nations, this studys methodology, ndings and focus on a non-western setting is indeed a useful contribution to the existing literature. Third, by focusing on the perception of Indian service providers, this research has added to the extant offshore outsourcing literature. Although the importance of stable provider-client relationships in determining long-term valued outcomes has been argued in the offshoring literature (Bharadwaj and Saxena, 2009; Kedia and Lahiri, 2007; Kedia and Mukherjee, 2009) the question regarding what factors determine RQ in ITES has not been adequately investigated. Our overall discussion of B2B relationships and determinants of RQ from the providers standpoint has generated the needed knowledge in this regard. Shedding spotlight on the providers is in itself a contribution as most of the outsourcing research has remained client-centric with relatively lesser importance accorded to the service providers (Parkhe, 2007). Finally, this study adds to the growing literature on emerging economies and extends knowledge relating to executive perceptions about a fast growing industry (ITES) in one of the fastest growing economies (India) of the world today (Lahiri, 2010; Wright et al., 2005). Overall, this multi-method study makes several very important theoretical contributions by extending current understanding of B2B relationships and of the factors that determine B2B RQ. We hope this research will enable future theory development whose impact may span multiple streams of research. Through this research, we have responded to several calls by Athanasopoulou (2009: 787) whose recent 20-year review of RQ literature suggests that there is a need to focus future research more on services and that we need more seller studies in order to test models, and we need more qualitative studies (case studies, interviews etc.) in order to get more detailed insights into the variables that affect RQ in each context. We hope that academicians engaged in diverse disciplines will nd our research and subsequent results interesting.

Implications and conclusion

This research makes several useful contributions for research and practice.

Theoretical Implications
The major contribution of this study lies in the investigation of factors that determine quality of B2B relationships. Given that answer to the question what factors determine RQ is still largely inconclusive, our study adds to the literature by extending knowledge on the antecedents of RQ. Our review of extant research provided evidence of examination of different research contexts and several partner-based and relationship-based variables relating to identifying various determinants of RQ. Blending insights from relationship-focused and global sourcing-based literature, and adopting a combination of qualitative and quantitative research methodology, we found that perceptions of human-related assets (KSA), organization-related assets (DNPC), management-related asset (MRC) and recent rm performance (RFP) determine RQ (Table 2). The positive inuence of internal assets and rm performance in predicting RQ in the context of ITbased global sourcing represent interesting and timely ndings, sheds new light on RQ, and signicantly adds to the RQ-based literature. Prior literature suggests that assessing determinants of RQ is not straightforward as it is a higher order construct composed of several important and overlapping dimensions. While focusing on a relatively new context, we chose to adopt a multi-method mode of research incorporating executive interviews and questionnaire survey. Not may studies have done that in the past. Although our results suggest the positive role of three important rm assets and recent rm performance in determining RQ, the predicting power of DNPC was maximum followed by those of MRC, KSA and RFP. These ndings suggest strong theoretical insights relating to RBV of the rm. The positive impact of various assets on RQ corroborates what RBV postulates important organizational outcomes are the result of possessing and suitably exploiting important rm-level assets (Armstrong and Shimizu, 2007; Barney, 1991). The results suggest that executives assessment of the nature of intangible resources and capabilities as well as perceptions about RFP are crucial in formalizing evaluations about RQ. Although resources and capabilities have been studied in numerous studies they have not been examined in connection with determining RQ. Thus apart from contributing to the relationship-focused and global sourcing literature, this study strengthens the applicability of RBV of the rm. The second contribution of this study lies in extending understanding of B2B or inter-rm relationships by examining relationship involving partners (clients and providers) engaged in IT-based global sourcing of services.

Managerial implications
This study has implications for executives of both provider and client rms. First, top executives of provider rms need to judiciously assess quality and contributions of various resources and capabilities that may potentially impact evaluation of ongoing relationships and result in subsequent relationship success. Table 2 and the relevant discus-

Determining quality of business-to-business relationships sion in this paper are helpful in this context. Our quantitative results imply that although executives need to focus on all the determinants of RQ, they need to cater greater attention to the development and utilization of DNPC as it emerged to be the strongest predictor. Detailed documentation of project reports and distribution of such information across levels of management and departments would help in this regard. Second, the least powerful yet positive role of recent performance suggests that executives need to correctly assess organizational performance and devise more rigorous conceptualization by including greater nancial and non-nancial measures (Kale and Singh, 2009; Venkatraman and Ramanujam, 1986). Such efforts will translate into better assessments of RQ and extent of willingness of partners to contribute to ongoing relationships. Third, our results imply that executives need to devise how best to acquire, generate, and retain organizational assets, particularly KSA, within organizational boundaries, and manage and deploy them to the maximum extent possible. One way to achieve this is by developing effective and exible human resource management (HRM) systems (Budhwar et al., 2006) that focus on providing the hired employees, particularly those at the project level, career counseling, motivation, career progression, and effective performance appraisal mechanisms. Finally, executives need to appreciate that matching and managing internal assets for business outcomes is a dynamic, ongoing process and that their perceptions of B2B relationships and quality are likely to change over time. Therefore, they need to anticipate various business-related changes (e.g., uctuating demands, industry maturity and consolidation) as efciently as possible and continue to generate and maintain pools of various resources and capabilities to allow effective conduct of business and development of enduring relationships (Kor and Mahoney, 2005; Lahiri et al., 2008). What are some implications for executives of client rms? First, managers who are in charge of ITES initiatives need to be well aware of and be appreciative of their providers relational expectations and strive to aid in their fulllment right from the project planning stage. Most Indian executives that we talked to expressed intentions of transcending their on-going relationships from tactical or strategic levels to transformational levels (Kedia and Lahiri, 2007), and incurring necessary investments to (a) enhance physical infrastructure, employee development and re-skilling, and (b) expand domain offerings and overall service quality standards. Thus, it is in their own interest that clients should consider providers as true alliance partners, and communicate business and relationship-related expectations with absolute clarity (Grifth, 2002; Wu and Cavusgil, 2006). Second, client managers should endeavor to understand the value of total resource, capability and alliance portfolio possessed by their providers and not just consider physical infrastructure or single competency indicator e.g., ability to work out new solutions at short notice. The four antecedents that we examined in this paper are intangible and, therefore, cannot be seen. Clients need to make concerted efforts to really know their

21 providers to the core to better understand the latters role in translating expectations into actual outcomes (Wagner, 2006). Third, client executives need to greater appreciate and reciprocate such attributes as trust, integrity, respect, commitment, risk sharing and joint problem solving that most providers expect. For, on these attributes perceptions relating to the on-going relationships depend. Finally, clients need to assist their providers in all possible ways to enhance the latters overall business performance. In particular, clients need to collaborate with the providers in their efforts to acquire, generate, retain and deploy various intangible assets that were found to predict RQ.

Limitations and future research directions

This research has few limitations that need to be overcome by future scholars. First, is the cross-sectional nature of research design. Our study was not meant to capture dynamic effects and, therefore, we could not grasp the impact of predictors over time or the changing nature of RQ over different stages of relationship formation. Future research can devise longitudinal studies that can overcome this shortcoming. Second, our focus was on the service providers from a single nation. In a way, this limits the generalizability of this studys results. Of course, conducting this study in a single setting did provide the advantage of controlling for potential country-level confounding variables. Future research may utilize our framework in examining providers from other nations or analyze samples from different locations in one study. We realized and therefore caution academicians that usually selling rms are very reluctant to provide information on their customer relationships and secondly it is difcult for executives to nd spare time in order to take part in the research effort (Athanasopoulou, 2009: 597). Future scholars need to access other secondary data sources such as industry archives, company documents, annual reports etc. so as to make their studies richer and more insightful. This will also allow for preparing detailed and multiple case studies and subsequently enable development of newer theoretical insights (Eisenhardt and Graebner, 2007). Finally, future scholarship on RQ will need to study dyadic combinations of clients and providers to generate more meaningful results.

Conclusion
To conclude, this study has addressed a crucial research question: what factors determine quality of B2B relationships involving global sourcing of information-technology enabled services? We hope the papers strong theoretical and practical contributions will stir contemporary thinking, encourage researchers to undertake additional B2B relationship-focused studies, and help corporate strategists better manage quality of ITES relationships Indeed, if partners in ITES desire to go far, they need to go together hand-inhand.

22

S. Lahiri, B.L. Kedia

Appendix A. Variable denition: the following questions have been used for creating the variables (1 strongly disagree,
2 somewhat disagree, 3 neither disagree nor agree, 4 somewhat agree, 5 strongly agree). Recent rm performance was measured as 1 lowest 20%, 2 lower 20%, 3 middle 20%, 4 next 20%, 5 top 20%.Appendix A. Variable denition: the following questions have been used for creating the variables (1 strongly disagree, 2 somewhat disagree, 3 neither disagree nor agree, 4 somewhat agree, 5 strongly agree). Recent rm performance was measured as 1 lowest 20%, 2 lower 20%, 3 middle 20%, 4 next 20%, 5 top 20%.

Construct KSA (human-related assets)

Indicators Our employees have bachelor degrees Our employees have relevant BPO experience Our project personnel are certied on BPOrelated processes Our project personnel have sound domain knowledge Our project personnel undergo requisite training

Standardized loading 0.51 0.67 0.78 0.53 0.68 0.50

t-value 10.12 8.34 11.12 12.34 9.23 15.56

Cronbach alpha 0.81

Composite reliability 0.83

DNPC (organizationrelated assets)

Our infrastructure (servers, broadband, routers, modems, voice and data circuits etc.) are state-of-the art We possess CMM certication that helps us to compete better Our organizational culture supports ideas for new ways of doing business Much of our rms norms and values are known by our employees Much of our organizations knowledge is contained in manuals, databases, and project documents We manage our human resources efciently We manage our national and international project demands equally well We manage our information systems efciently We manage various technology-related changes efciently We manage to satisfy most of our clients requirements

0.75

0.78

0.89 0.77 0.59 0.73

16.91 10.78 18.31 17.29

MRC (managementrelated capability)

0.86 0.95 0.74 0.67 0.78 0.66 0.76 0.85 0.55 0.52 0.89 0.86 0.74 0.92 0.83

23.32 18.57 25.34 16.98 24.67 17.56 21.45 19.67 23.49 18.71 21.89 24.67 19.89 20.78 18.71

0.87

0.87

RFP (recent rm performance)

Firm total sales growth After-tax return on sales Overall rm performance and success Organizational competitive position Gaining new markets

0.85

0.89

RQ (relationship quality)

We and our clients make mutually benecial decisions in most circumstances We and our clients understand each others business well We and our clients share the benets and risks of our business We and our clients share compatible culture and policies We and our clients fulll pre-specied agreements and promises in most cases

0.83

0.83

Model t statistics: v2 [83, n = 105] = 256.60, p = 0.00, v2/df = 3.09; RMSEA = .06, GFI = .95, NFI = .95, NNFI = .93, CFI = .96, AGFI = .94.

Determining quality of business-to-business relationships

23
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S. Lahiri, B.L. Kedia

Woo, K. and Ennew, C. T. (2004) Business-to-business relationship quality: An IMP interaction-based conceptualization and measurement. European Journal of Marketing 38, 12521271. Wu, F. and Cavusgil, S. T. (2006) Organizational learning, commitment, and joint value creation in interrm relationships. Journal of Business Research 59, 8189. Zaheer, S., Lamin, A. and Subramani, M. (2009) Cluster capabilities or ethnic ties? Location choice by foreign and domestic entrants in the services offshoring industry in India. Journal of International Business Studies 32, 667686. SOMNATH LAHIRI is Assistant Professor of Strategy and International Business at the department of Management and Quantitative Methods, Illinois State University, USA. He received his PhD from the University of Memphis, USA. His teaching and research interests are in international business and management with particular focus on emerging economies. He has previously worked as a professional engineer for private and government organizations in India. His research has been published in Asia Pacic Journal of Management, Business Horizons, and Journal of International Management among others.

BEN L. KEDIA holds the Robert Wang Chair of Excellence in International Business and is Director of the Wang Center for International Business Education and Research (CIBER) at The University of Memphis, USA. He received his Ph.D. from Case-Western Reserve University, USA. His teaching and research interests include Cross-Cultural and Comparative Management, and International Business Strategy. His research has been published in several journals including the Academy of Management Review, Journal of World Business, Management International Review, International Business Review, and European Management Journal.