A process explanation of the effects of institutional distance between parties in outsourced information systems development projects

Outsourced information systems development (OISD) projects are challenging endeavors, and the literature suggests differences between the parties involved as critical hinderers of such projects. Using institutional theory as a foundational theory, we propose a process explanation of the effects of differences between parties in OISD projects. Our explanation relies on the interaction of four components: (1) the IS development and project management institutional profiles of the parties involved; (2) the institutional distance between practices within these profiles; (3) instances of conflicting institutional demands when institutional distance becomes salient; and (4) the repertoire of institutional strategic responses available to parties to address those instances. We suggest that the constitutive elements of institutional distance and the degree to which parties envision their collaboration beyond the project at hand contribute to explaining the enactment of strategic responses. Accounting for the fact that practices, as well as the institutional logics that drive their enactment, may differ between parties, we make a theoretical contribution to the literature on OISD by building a fine‐grained explanation of the effects of differences between parties in OISD projects.