Measuring switching costs in IT outsourcing services

Switching costs play a major role in managerial decisions to (dis)continue an IT outsourcing service. This paper emphasizes the importance of switching cost analysis to the understanding of interorganizational exchange relationships. Based on transaction cost theory and social exchange theory, we specify a second-order switching cost model that provides greater insight into the underlying dimensions influencing switching behavior. The multidimensional nature of the switching cost construct is modeled and tested using data from organizations that outsource the application development function. Findings provide support for a higher-order construct with implications for how switching costs are defined, measured and operationalized in larger nomonological models.