Does technological modularity substitute for control? A study of alliance performance in software outsourcing

• Published in: Strategic management journal Vol. 29; no. 7; pp. 769 - 780
• Main Author: Tiwana, Amrit
• Format: Journal Article
• Language: English
• Published: Chichester, UK John Wiley & Sons, Ltd 01.07.2008; John Wiley and Sons; Wiley Periodicals Inc
• Subjects: alliance governance; Alliances; Business networks; Computer software; Control; Control theory; Control variables; Corporate strategies; Data analysis; Empirical research; Innovation; knowledge intensive alliances; Management science; Modularity; Outsourcing; outsourcing alliances; Performance enhancing substances; Process control; Process controls; Research Notes and Commentaries; Software; Strategic management; Studies; Technological change; Technology
• ISSN: 0143-2095; 1097-0266
• DOI: 10.1002/smj.673

Although control is presumed to be necessary to curb opportunism, its implementation in alliances can be costly and challenging. Paradoxically, some contemporary firms have counterintuitively developed successful alliances without extensive formal control. A widespread but untested assertion that might help reconcile this contradiction is that technological modularity reduces the need for alliance control. The objective of this study is to develop and test this assertion. Using data from 120 software outsourcing alliances, we show that, process control, outcome control, and modularity independently enhance alliance performance. However modularity and control are imperfect substitutes: modularity lowers the influence of process control but not of outcome control on alliance performance. Our theoretical development and empirical testing of the interactions of alliance control with modularity has significant implications for strategy theory and practice, which are also discussed.