This project extends transaction cost theory to decisions regarding inter-firm research and development services in the particular context of software development. The research is supported under the Joint NSF/Private Sector Initiative and involves a collaborative effort between twenty-one private-sector organizations and the principal investigators. The objective of the study is to test important questions benchmarking sourcing procedures for software development. This project's model of sourcing decisions and outcomes is richer than those usually found in research on vertical integration. No other study has examined both the sourcing decision and supplier performance separately, although there are strong theoretical reasons why this design is advisable. The design enables conceptual distinctions to be made between important questions. Also, the data are not subject to the usual problems of hindsight measurement bias or to difficulties in attributing causality. The model for this research is grounded in problems of software sourcing that the cooperating organizations currently face. The resources dedicated to choosing and managing new developers have been rapidly increasing in recent years. The results of this study should lead to new approaches to solving sourcing problems more generally in a world of inter-firm reliance and cooperation. Thus, although the projects is based in theory, it has strong operational component. This project will help both the cooperating organizations and academic researchers learn how to initiate and carry out this kind of research partnership.
