to already have successful IT deployments relative to their
competitors (Dibbern et al. 2004; Hall and Liedtka 2005).
Sales efficiency is measured as the ratio of sales to the
number of employees and is a measure of productivity. Cost
inefficiency is measured as the ratio of selling, general, and
administrative expenses (SGA) to sales (Smith et al. 1998).
A firm’s sourcing decision may also be associated with
financial ratios that are indicative of its cash flow, such as its
leverage (Hall and Liedtka 2005). An important motivation
for firms to outsource is the generation of cash through the
sale of IT assets (Lacity and Hirschheim 1993; Smith et al.
1998). Firms with higher leverage have the incentive to
engage in IT outsourcing to increase internal cash
equivalence.