Determinants of Sourcing during Technology Growth and Maturity

This paper conducts a two-period dynamic analysis of sourcing mode choices for e-commerce projects implemented by large firms during 1999–2002. We 48 KISHORE, AGRAWAL, AND RAO differentiate e-commerce assets that are the focus of a sourcing decision in terms of whether they are in the growth or maturity stages. We also consider hybrid governance mechanisms, such as minority equity arrangements, as a potential sourcing mode in addition to the conventional distinction between insourcing (i.e., hierarchical governance) and outsourcing (i.e., market governance). The rapid evolution in ecommerce technologies and their markets during this period allows us to test whether asset maturity plays any role in sourcing decisions. Results indicate that when the strategic intent of an e-commerce project is more business focused during the growth phase, hybrid governance is preferred over hierarchical governance for sourcing of e-commerce assets. Strategic intent is found not to influence sourcing mode choices during the technology/market maturity phase. Hierarchical governance is the preferred sourcing mode during the growth phase, when task complexity is high. For managing task complexity, as technologies and their markets mature, both hierarchical and hybrid governance modes become preferable to the market governance mode.