Coordination in Consultant-Assisted IS Projects: An Agency Theory Perspective

Abstract

Increasingly, consulting firms are employed by client organizations to participate in the implementation of enterprise systems projects. Such consultant-assisted information systems projects differ from internal and outsourced IS projects in two important respects. First, the joint project team consists of members from client and consulting organizations that may have conflicting goals and incompatible work practices. Second, close collaboration between the client and consulting organizations is required throughout the course of the project. Consequently, coordination is more complex for consultant-assisted projects and is critical for project success. Drawing from coordination and agency theories and the trust literature, we developed a research model to investigate how interorganizational coordination could help build relationships based on trust and goal congruence and achieve higher project performance. Hypotheses derived from the model were tested using data collected from 324 projects. The results provide strong support for the model. Interorganizational coordination was found to have the largest overall significant effect on performance. However, its effect was achieved indirectly by building trust and goal congruence and by reducing technical and requirements uncertainty. The positive effects of trust and goal congruence on project performance demonstrate the importance of managing the client-consultant relationship in such projects. Project uncertainty, including both technical and requirements uncertainty, was found to negatively affect goal congruence and trust, as expected. This study represents a step toward the development of a new theory on the role of interorganizational coordination.