During the last decade, outsourcing has emerged as a major issue in information technology and systems (ITS) management. However, the e-commerce revolution has created and forced the transformation of traditional ITS outsourcing structures into new ITS outsourcing configurations-for example, Internet service outsourcing, application service outsourcing, and business service outsourcing. In outsourcing, more than half of all deals are unsuccessful. Thus, managers have had to rethink their sourcing options in fundamental ways.
Two theories that have been proposed to assist managers with their sourcing decisions are Transaction Cost Theory (TCT) and the Resource-Based View (RBV). To date, however, no studies have been done empirically to compare these two theories in terms of their power to predict and explain sourcing decisions. Moreover, no study has been undertaken to determine whether TCT or the RBV accounts better for an organization's sourcing decision when the organization deems that it has made the most effective decision.
This study posits that assets and resources are equivalent concepts. Specific assets under TCT and strategic resources under the RBV, however, are different constructs and lead to three contexts where sourcing decisions will differ: high-specificity, nonstrategic resources; low-specificity, non-strategic resources; and low-specificity, strategic resources. This thesis examined small, eastern culture firms to test the conflicting predictions made by TCT and the RBV in these three contexts. A longitudinal case-study method was used to test these conflicting predictions in the context of email marketing, which is an example of an important contemporary sourcing decision.
The findings indicate that TCT explains an organization's sourcing decisions better than the RBV when these two theories make conflicting predictions about a sourcing decision. In particular, consistent with predictions made by TCT, the existence of a high-specificity asset was found to be a major driver of an organization's sourcing decision. It overpowers the effects of uncertainty on sourcing decisions. Contrary to predictions made by the RBV, the existence of a non-strategic resource was found to have no impact on an organization's sourcing decision. In addition, when assets are combined to make composite assets, the level of asset specificity increases.
This research contributes to future articulation of TCT and the RBV. An important finding is that specialized and specific assets are different. While both specialized and specific assets are developed to perform certain tasks, specific assets have a significant reduction in value in alternative uses. Specialized assets, on the other hand, do not. Some specialized assets are specific assets because they can be employed by one party to the transaction to cause a hold-up problem. Some (composite) assets also arise as a result of associations between the same or different levels of specialized and specific (component) assets: high-specialized, high-specificity assets; high-specialized, low specificity assets; low-specialized, high-specificity assets; and low-specialized, low specificity assets. The specificity of a composite asset emerges as a result of relationships among its component assets. These relationships vary in complexity and thus result in different levels of specificity.
In terms of the RBV, this research finds that composite assets are often complex. Their components interrelate to produce a barrier to imitation. As a result, composite assets lead to the existence of strategic resources because they impede imitation.