The impact of information systems outsourcing on knowledge created within or between firms may be affectedrnby the strategic value of assets outsourced, the number and effectiveness of communication channels betweenrnfirms, and the embeddedness of firm specific knowledge in the processes or personnel outsourced.rnMany benefits of outsourcing are inextricably linked to management’s capability to manage knowledge withinrntheir organization and with the outsourcing vendor. Within the information systems outsourcing literature, Irnfind a greater emphasis on losing knowledge rather than using outsourcing as a vehicle to gain knowledge.rnI identify four assumptions about knowledge that must occur for many benefits of outsourcing to be realized.rnThese four types of assumptions are knowledge retention, redirection, application, and integration. Knowledgernretention is the assumption that a firm will not have to expend additional resources to rebuild knowledge lostrnthrough outsourcing, but will retain sufficient knowledge within the firm. Knowledge redirection is thernassumption that the knowledge resources retained can be redirected to core missions. Knowledge applicationrnis the assumption that managers of a firm can apply the skills, capabilities, or know-how of a vendor to theirrnbusiness. Knowledge integration is the assumption that the firm and vendor managers can create jointly newrnknowledge to be applied to either the firm or vendor’s business. Hence, managers may need to consider notrnjust the mitigation of losing firm knowledge but also how to retain, redirect, apply or integrate knowledge.rnThe strategic alliance literature considers the resource and knowledge-based views of the firm, suggestingrninter-firm alliances are created to access knowledge from one another. Using insights from strategic alliancernliterature and the concept of absorptive capacity, I develop five propositions about the impact of informationrnsystems outsourcing on the ability to create knowledge inside and outside the firm.
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