Offshore Information Systems Project Success: The Role of Social Embeddedness and Cultural Characteristics

Agency theory has served as a key basis for identifying drivers of offshore information system project success. Consequently, the role of relational factors in driving project success has been overlooked in this literature. In this paper, we address this gap by integrating the social embeddedness perspective and the culture literature to theorize how and why relational factors affect the success of offshore IS projects that are strategic in nature. We identify organizational and interpersonal cultural differences as critical success factors in this context. Using data from a longitudinal field study of 155 offshore IS projects managed by 22 project leaders, we found evidence of a relationship between hypothesized relational factors and two measures of offshore IS project success—namely, project cost overruns and client satisfaction—over and above the effects of project characteristics and agency factors. Specifically, we found that information exchange, joint problem solving, and trust reduce project cost overruns and improve client satisfaction. We also found a relationship between cultural differences at the organizational and team level, and offshore IS project success. The model explained 40 percent and 41 percent of the variance in project cost overruns and client satisfaction, respectively, for projects with a client representative. For projects with no client representative, the model explained 35 percent and 37 percent of the variance in project cost overruns and client satisfaction, respectively. Collectively, the results have important theoretical and practical implications for how client– vendor relationships should be managed when partnering with offshore firms and designing offshore IS project teams.