Abstract

INTRODUCTION Since the recession in the 1980s, U.S. corporations have been strategically acquiring, merging, restructuring, and downsizing. Such strategic adjustments are aimed at configuring "leanandmean" operations in response to the increasingly dynamic, competitive and uncertain business climate (ScottMorton, 1991). A direct consequence of these radical changes to business operations is the revolutionary change in the traditional employer employee working relationship. Pfeffer and Baron (1988) suggest that there is a trend toward "taking the workers back out", in which organizations externalize a buffer of temporary workers against the core or permanent workforce. This externalization involves the use of contingent workforce where workers are physically transported out of the organization's boundaries to perform their work; where the duration of employment becomes shorter and more flexible; and where workers are detached administratively with organizations reducing their internal control of workers. Recent literature suggests that externalization of the workforce has been particularly pronounced in information systems (IS). Many internal IS organizations have been undergoing continual downsizing of their traditional permanent workforce since the late 1980's by outsourcing and contracting (Niederman and Trower, 1993; Korzeniowski, 1990). Molloy (1991) highlighted an increasing number of temporary executive IS jobs while Ryan (1991) observed that jobless IS workers are turning to contract work to tide over their midcareer crisis. Clearly, these trends have significant implications for IS human resource management. For example, IS careers, incentive structures, and mutual employerworker obligations will be affected radically by an increasing presence and use of contingent workforce in organizations. However, despite the changing nature of IS employment options and the importance of IS human resource management (Niederman, Brancheau and Wetherbe, 1991), there has been little systematic analysis of the nature, extent and antecedents of externalizing IS human resources in organizations. Our study is designed with two objectives: to provide an empirical analysis of actual trends in IS employment strategies and to derive an explanatory model predicting the choice of a particular IS employment strategy. Thus, the first set of issues examined concerns the forms and trends of alternative employment strategies in IS. We examine the following questions: what are the hiring options opened to both employers and workers in IS ? what is the trend in alternative employment strategies in IS since the 1980s ? We draw upon transaction cost economics to derive an explanatory model predicting the antecedents of IS employment strategies. The choice to use internal or external IS employment strategies can be framed as a classic "make or buy" decision of transaction cost economics, with respect to human capital inputs. Economists have often focused on costs inherent in various make or buy decisions. Coase (1937) originally theorized about the tradeoffs between transaction costs of external procurement and management costs of internal production. Demsetz (1988) argued that there are three different kinds of costs: production costs, exchange or transaction costs, and management costs inherent in any boundary outcome and that it is a combination of all three that is important in determining the make or buy decision. Williamson (1981) shifted attention away from distinguishing transaction and management costs, as these costs are difficult to measure operationally. Instead, in the context of labor factor inputs, he focused on the presence of particular job characteristics such as firm specificity of skills, high interdependency, difficulty in monitorability, and task complexity, emphasizing the burden of management and transaction costs when jobs are externalized. In effect, these job characteristics offer proxy measures of transaction costs. Thus, the second set of issues examined in this study concerns the kinds of considerations that play a role in boundary determination for IS labor. We examine the following questions: how do transaction costs determine IS labor boundaries ? what kinds of IS skill and job characteristics are associated with alternative employment strategies for IS labor ?

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