Internal vs. External IT Capabilities: When to Hire Consultants?

External IT consultants are specialists who bring in skills that may be lacking within a firm. However, a lack of firm specific knowledge, low legitimacy, and a host of other factors may limit the effectiveness of IT consultants. From a resource-based perspective, consultants can represent a rich source of short term, valuable capabilities. These capabilities, however, may be at odds with exiting internal capabilities. Institutional theory suggests that external consultants may not share the same norms and beliefs held by the internal staff and consequently their efforts will be ineffective in achieving organizational goals. The paper explores this tension using survey data to track the benefits accruing from the use of internal and external IT capabilities in the adoption of Internet business solutions. The results show that firms see tangible benefits from using external IT consultants but that these benefits are moderated by the level of existing internal IT capabilities.