Four non-transaction cost factors are also investigated. These four non-TCE factors are IT competency, IS influence, heterogeneity of information systems, and decision analysis effort. Multiple regressions are used to test hypotheses in the first stage. In the second stage, hypotheses are proposed based on prior relationships between clients and vendors in order to study the determinants of the intention to continue with the outsourcing relationships. Prior relationships are represented by the four types of outsourcing relationships based on two dimensions of outsourcing, vendors performance in terms of client satisfaction, vendors' opportunistic behavior and the length of prior relationships.
Logistic regression is employed to test hypotheses in the second stage.
Questionnaires were developed based on interviews with IS manager and pretested. A follow-up letter was mailed to those who had not responded after about three weeks. In the first stage the results indicate that asset specificity, IT competency, and decision analysis effort have positive impact on the differentiation aspect of the strategic impact of IS applications. However, when the focus is on cost reduction, none of the three factor is significant. For the extent of substitution, uncertainty has a negative impact, heterogeneity of IS systems has a positive impact, IT competency has a negative impact, size of firm has a positive impact.