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Revising the IT outsourcing decision model: a transaction cost perspective

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Abstract

Williamson’s (1979) transaction cost theory (TCT) has been widely used in information technology (IT) outsourcing research. This research, however, has led to mixed and unexpected results. From a theoretical standpoint, this paper argues that the conceptualization of the constructs and, more importantly, the linkage among constructs that IT outsourcing decision models have hypothesized are not completely in line with TCT. By reviewing the extant IT outsourcing decision models, this paper proposes a model of IT outsourcing decision that is closer to TCT than its predecessors. The model links transaction attributes to the outsourcing decision through a cost analysis mechanism, and also includes some attributes of transactions that have been ignored in past IT outsourcing research. In addition, the proposed model re-examines the role of some transaction attributes by taking into account their moderating effects.