The role of Transaction Cost Economics in Information Technology Outsourcing research: A meta-analysis of the choice of contract type

Abstract

Two recent reviews report that the empirical findings in information technology outsourcing (ITO) research are frequently inconsistent with the prevailing dominant analytical framework of transaction cost economics (TCE). While employing similar methodologies, the two reviews propose different strategies to resolve the inconsistencies. One is to improve the methodological rigor, specifically, the operationalization of TCE constructs. The other is to abandon TCE in favor of a new analytical framework. This paper presents a meta-analysis of the empirical findings on the choice of contract type as a function of task uncertainty. The results support both strategies. Refining the operationalization of TCE constructs, specifically of task uncertainty, would have improved the reliability of findings on TCE-based relationships between task uncertainty and the choice of contract type. However, independent of such methodological improvements, TCE is of limited relevance in recent ITO research for predicting the choice of contract type. Generalizing these findings, we conclude that ITO research requires a new analytical framework to further develop the theory of ITO and to provide sound guidance to the ITO industry.