Spatial and temporal trends in information technology outsourcing

Over the last two decades information technology (IT) outsourcing has grown dramatically, and has emerged as a strategic choice for firms searching for ways to control their costs and maintain a competitive edge. The mechanisms driving its growth are not fully understood though. In this research, we employ an approach that focuses on geographic, temporal, and industrial proximity in a mechanism that identifies the process underlying the diffusion of IT outsourcing across firms within the U.S from 2000 to 2010. We focus on the role that firm location plays in the diffusion process, and use space-time clustering techniques from the epidemiology literature to understand the diffusion process. We identify 38 space-time clusters based on IT outsourcing announcement data and the locations of firm headquarters among U.S.-based firms. When supplemented with additional information, such as type of services outsourced, the metropolitan area of the headquarters, and related industry information; the results offer insights into various types of diffusion processes that have been identified in the literature but have not been documented to date in the empirical manner that we have been able to do.