Effect of Mutual Knowledge in Offshore Outsourced Software Development Projects

This paper investigates under what conditions knowledge available to team members leads to positive performance outcomes. We surmise that mutual knowledge that enables the team members to coordinate their work efforts is beneficial for team performance up to a limit after which excess mutual knowledge causes a decline in performance. We further suggest that the inverted U relation between mutual knowledge and performance will be amplified when team size is low and neutralized when team size is high. Similarly we hypothesize that the inverted U relation between mutual knowledge and performance will be amplified when Onsite ratio is high and neutralized when Onsite ratio is low. We test these hypotheses in a sample of offshore outsourced software services projects and find support for all our assertions.