An increasingly large number of firms outsource their information technology (IT). Firms that contemplate such outsourcing have two alternatives: (1) a contract with a vendor (i.e., outsourcing) or (2) setting up their own IT subsidiary (i.e., quasi-outsourcing). This study examines some of the determinants of the outsourcing versus quasi-outsourcing decision. Using primary data collected in France and Germany, we show that the decision is strongly influenced by both internal (i.e., asset-specificity, size, and internal organization of IT) and external (i.e., institutional environment) determinants.
