IT Outsourcing: Examined Under the Resource-Based View Lens

The proponents of the resource-based view (RBV) have long argued that a firm gains sustainable competitive advantage from those resources and capabilities it controls and which are valuable, rare, imperfectly imitable, and not substitutable. So, does information technology (IT) outsourcing strip companies of any competitive advantage that is attributed to IT? It has been said that information systems that cannot sustain competitive advantage are transient and are not expected to enhance firm valuation. In that case, does it imply that outsourcing of certain aspects of IT can lead to sustained competitive advantage? Therefore, this paper’s main research question is: Does IT outsourcing lead to sustained competitive advantage for a firm? In order to empirically examine this, it is proposed to study the impact of IT outsourcing announcements on firm valuation using the event study methodology.