Management Control of Support Services: The Case of IT Sourcing

Abstract

This paper provides evidence on the factors that influence the design of the control arrangements that govern support services. Based on TCE, we hypothesize that control structure choices depend on asset specificity, uncertainty, and frequency. Using survey data on IT sourcing decisions from 89 firms in the construction industry, we find support for most of our hypotheses. Our results indicate that asset specificity negatively affects firms’ propensity to outsource, and that (behavioural) uncertainty intensifies this negative effect. As expected, we also find that frequency has a negative direct effect on the willingness to outsource IT services provision. However, we find no support for the hypothesized interaction between asset specificity and frequency.

Keywords: support services, sourcing decisions, information technology, transaction cost economics

JEL Classification: L22, M41