Bilateral, Collective, or Both? Formal Governance and Performance in Multisourcing

Krancher, Oliver; Oshri, Ilan; Kotlarsky, Julia; Dibbern, Jens (2022). Bilateral, Collective, or Both? Formal Governance and Performance in Multisourcing. Journal of the Association for Information Systems, 23(5), pp. 1210-1234. AISeL 10.17705/1jais.00751

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While multisourcing offers benefits such as access to best-of-breed resources and enhanced
competition, it also presents clients with a new governance challenge, namely the need to ensure that
vendors not only deliver their individual contributions but also collaborate to produce a coherent
joint outcome. Clients can address this challenge by combining bilateral governance focused on each
vendor’s individual performance with collective governance aimed at the vendors’ joint
performance. However, it is unclear how the simultaneous application of bilateral and collective
governance affects multisourcing performance. Indeed, the literature falls short in systematically
differentiating these governance mechanisms and empirically examining their interplay. Drawing on
existing work on multisourcing and on the outsourcing governance literature, we argue that bilateral
and collective governance direct efforts toward different performance dimensions (individual vs.
joint), invoke different metaphors (market vs. team), and promote conflicting norms (competitive vs.
cooperative), which can result in trade-offs when bilateral and collective governance mechanisms
are combined. Results from a survey of 189 multisourcing arrangements support our expectation that
bilateral and collective governance promote different performance dimensions. Notably, one
collective governance mechanism, conflict management procedures, contributes to both individual
and joint performance. We find substitutional effects between bilateral and collective governance in
relation to joint performance but not individual performance, indicating that the benefits of collective
governance for joint performance are more easily compromised than the benefits of bilateral
governance for individual performance. We also observe complementary effects within collective
governance mechanisms. Our key contribution lies in theorizing and empirically examining the
effects and interplay of bilateral and collective governance in multisourcing.

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