An examination of the trade-off between internal and external IT capabilities

Abstract

The business case for hiring external IT consultants is compelling. Consultants can represent a rich source of valuable, short-term capabilities. From a resource-based perspective, however, the fungible nature of these capabilities argues against their long-term strategic value. Furthermore, IT consultants may be at odds with existing internal capabilities. Institutional theory suggests that external consultants may not share the same norms and beliefs held by the internal staff and consequently their efforts in achieving organizational goals may be diluted or compromised. This paper explores the tension between internal and external IT capabilities on the realization of enhanced IT productivity. Drawing on telephone survey data on the adoption of Internet business solutions, the results of the study show that firms see tangible benefits from using external IT consultants, but these benefits are moderated by the level of existing internal IT capabilities.