The Value Proposition of Captive Offshore Development Centers: Exploring the Role of IT Capabilities and Antecedent Factors

Increasingly, organizations establish off shore captive centers to exploit the large IT labor pool and to retain proprietary knowledge. However, a key management issue facing these organizations is one of realizing value beyond economic cost advantages from its captive centers. To address this issue, we adaptedVenkaraman´s value center concept and the global subsidiary evolution model to this context. Using the data gathered on the evolution of captive centers of GLOBALIS, a large US financial services firm, we explored the role of IT capabilities and antecedent factors on captive center´s value proposition. Our findings indicate that headquarters assignment of responsibilities and captive center´s choice of activities lead to the development of distinct human, technological and relationship capabilities that enable a captive center to generate superior value for its parent IT organization. This study extends prior research in IS outsourcing, and has important implications for researchers and practitioners alike.