Multi-level knowledge transfer in software development outsourcing projects: the agency theory view

In recent years there has seen an increased interest in software development outsourcing 1 (SDoutsourcing) in both academia and practice (Krishna et al. 2004; Rustagi et al. 2008; Wanjin et al. 2007). Countries like India, Sri Lanka and Philippines have gained a reputation of receiving software development outsourcing projects, mostly from western nations (Heeks 1999; Ramingwong and Sanjeev 2007; Siakas et al. 2006). The SD-outsourcing is complex, where the client (‘Principal’ as per agency theory) and outsourcing partner (‘Agent’ as per agency theory) interact to produce the required software product/service (Gopal and Gosain 2010b). To produce the necessary outcome, the Principal must interact with the Agent to transfer knowledge of the requirements the software. The Agent in turn must interact with the Principal, as well as with other outsourcing partners. This involves significant technical activities combined with business knowledge from the various stakeholders (Gopal and Gosain 2010b). Thus, such projects are highly knowledge intensive that necessarily draws upon knowledge between the Principal and the Agent. The success of a SD-outsourcing project will largely depend on the goodness of the knowledge transfer between the key parties. It is therefore expected that the required knowledge be transferred from the Principal to the Agent. The Agent, in turn should acquire the deliverable specific knowledge from the Principal, usually within a short time (Chua and Pan 2006). Though the concepts of knowledge transfer in SD-outsourcing are theoretically simple, it is one of the most challenging concepts to both the Principal and the Agent (Bjornson and Dingsoyr 2008). Over the years, many studies have addressed various aspects of SD-outsourcing process such as relationships and communication between the outsourcing partners (Alami et al. 2008; Gopal et al. 2002), organizational controls and risks (Gefen et al. 2008; Gopal and Gosain 2010a) and the opportunities and challenges in SD-outsourcing (Haddad and Vincent 2007; Jones 2009). Some studies specifically explored the importance of knowledge transfer in SD-outsourcing (Betz et al. 2010; Salger and Engels 2010), knowledge transfer issues and the impact of those issues for SD-outsourcing projects (Dedrick et al. 2011; Williams 2011) and the factors influencing the knowledge transfer process (Alavi and Leidner 2001).