Offshoring and social exchange: a social exchange theory perspective on offshoring relationships

Social exchange theory deals with social behavior in the exchange of activities between organizations. The theory holds that the relationships experienced should be close but flexible. 1 This study captures the social relationship factors from social exchange theory (trust, power, dependence, communication and shared values) that underlay the client-vendor relationship and presents empirical evidence for the effectiveness of a relational approach to offshoring. This is not an intuitive approach, especially when offshoring. It is an especially difficult approach to take in a time when wide spread offshoring failures are encouraging client companies engaged in offshoring to try and keep control with strict contracts that stifle flexibility and to limit their vulnerability by maintaining other boundaries that restrict relationships. 2