Management control systems and trust in outsourcing relationships

This paper draws on a model by van der Meer-Kooistra and Vosselman to examine how control mechanisms and trust are used to achieve control in a single case study of an electricity company and its outsourced IT operations.

Abstract

Outsourcing is a form of strategic alliance that has increased in popularity over the past decade. However, there has been limited research that studies the design of management control systems (MCS) and the role of trust in such inter-firm relationships. This paper draws on a model by van der Meer-Kooistra and Vosselman [Acc. Organ. Society 25 (2001) 51] to examine how control mechanisms and trust are used to achieve control in a single case study of an electricity company and its outsourced IT operations. An analysis of the characteristics of the transaction, environment and parties, indicated that the control strategy adopted appeared to be a trust based pattern of control, rather than a market based or bureaucratic based pattern. Control was achieved through outcome controls and social controls developing over time, and through the development of trust, particularly goodwill trust. This paper adds to the growing knowledge of the design of control systems and trust in outsourcing relationships.