Combining transaction cost and resource-based insights to explain IT implementation outsourcing

This empirical work aims to shed some light on the governance choice for information technology (IT) outsourcing decisions. By combining transaction cost and resource-based arguments, we explain the role that some economic and strategic factors as well as their relationships may play. Hypotheses are tested for the implementation of an HR software application with primary data collected from large Spanish firms. Findings seem to provide more support for resource-based arguments than for transaction-cost propositions. Thus, our results suggest that cumulative knowledge from either coordination and interaction between internal units or experience in IT outsourcing is not a significant factor unless the organization is able to develop a strategic capability. Unlike for technology specificity, no evidence was found for the significance of behavioral uncertainty and strategic contribution.