Overall, we conclude that these findings are consistent with
the theory. The interaction term for IT knowledge and IT
intensity indicate that the knowledge held by vendors is an
important determinant of productivity. Moreover, when
service type is considered, the interaction of knowledge with
software-focused services is significant, while its counterpart
with hardware-focused services is not, indicating that knowledge
seems to matter mainly for the types of tasks embodied
in software. This is not surprising since software services
require considerable expertise in software development and
maintenance processes as well as in industry and process
domains. To the extent that firms outsource more inefficient
IT processes (over efficient ones) which may involve a
transfer of less efficient assets to the vendor, we expect the
coefficient of IT capital to be higher for the IT capital that is
retained in outsourcing client companies. Moreover, in that
outsourcing results in new or better IT systems and that
knowledge spillover from the vendor can lead to improvement
in a client’s own IT management processes, the returns
on a client’s IT capital may increase. This finding is consistent
with Han and Mithas (2009) who show that internal IT
investments and IT outsourcing are complements. On the
other hand, in that our measure for internal IT capital may be
correlated with transferred IT assets, the magnitude of the IT
coefficient for outsourcing firms could be higher.