How do IT outsourcing vendors develop capabilities? An organizational ambidexterity perspective on a multi-case study

Abstract

Vendor capabilities are an important research stream in the IT outsourcing literature. The extant studies have generated rich findings on how vendors develop capabilities, but these findings have mainly been based on the condition of vendors improving their existing business. How vendors develop capabilities to move up the value chain has received little prior research attention. A key challenge for vendors in moving up the value chain is the development of new capabilities while maintaining the existing ones. This challenge is consistent with achieving exploration and exploitation in organizational ambidexterity. Hence, we adopt organizational ambidexterity as our theoretical lens. By conducting a case study on four IT outsourcing vendors in China, we identify four classifications for achieving ambidexterity in capability development and the context for each classification. These classifications are based on combinations of different structural arrangements and processes for achieving ambidexterity. Our study contributes to the research on IT outsourcing vendor capabilities by improving our understanding of capability development in vendors moving up the value chain. It also contributes to the organizational ambidexterity literature by identifying the factors that influence the choices of different structural arrangements and processes.