Abstract
The burgeoning importance of IS outsourcing has become a critical issue at the city government level. In spite of this importance, comprehensive research on factors influencing IS outsourcing has not been conducted. Due to rapidly changing technology and IS facilities, the determinants of IS outsourcing are substantially different from non-IS outsourcing. In this article, three theoretical perspectives are examined: (1) transaction cost theory, (2) organizational factors, and (3) diffusion of innovation. This empirical study found that transaction cost theory is not an appropriate theory to explain IS outsourcing activity in the city government. Instead, we propose that resource-based theory could cover the explanatory power of transaction cost theory and organizational factors.
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