Explaining Endogenous Control Change in Outsourced Software Projects

Given the centrality of control for achieving success in outsourced software projects, past research has identified key exogenous factors that determine the choice of controls. This view of exogenously driven control choice is based on a number of assumptions; particularly, clients and vendors are seen as separate cognitive entities that combat opportunistic threats under environmental uncertainty by one-off choices or infrequent revisions of controls. In this paper we complement this perspective by acknowledging that an outsourced software project may be characterized as a collective, evolving process faced with the challenge of coping with cognitive limitations of both client and vendor through a continuous process of learning. We argue that if viewed in this way, controls are less subject of a deliberate choice but rather are subject of endogenously driven change, i.e. controls evolve in close interaction with the evolving software project. Accordingly, we suggest a complementary model of endogenous control, where controls mediate individual and collective learning processes. Our research contributes to a better understanding of the dynamics in outsourced software projects. It also spells out methodological implications that may help improve cross-section control research.