The Firm as a Coordination System: Evidence from Software Services Offshoring

To examine what, if any, are the differences in how activities are coordinated within-firms vs. between-firms we conducted interviews with 32 project managers regarding 60 projects in the offshore software services industry. Uniquely, our projects were sampled along two dimensions: (1) co-location vs. spatial distribution and (2) were delivered by groups of individuals from a single firm vs. from multiple firms. Our evidence suggests that in colocated projects, the same broad categories of coordination mechanisms are used both withinand between-firms. However, there is a qualitative difference in how geographically (i.e. spatially) distributed projects are coordinated withinvs. between-firms. Distributed projects conducted within-firms rely extensively on tacit coordination mechanisms; such mechanisms are not readily available in between-firm projects that are spatially distributed. The difference may arise because of the lack of shared history and lack of enforcement through common authority in the between-firm context.