Using property rights theory to overcome success barriers to software development project: Protection of contractors' knowledge

A fundamental tenet of the information systems discipline holds that: (a) changing requirements in software development projects (SDP) are the main reason for failure; (b) therefore, in case of such uncertainties, fixed-price contracts (FPC) are not suitable for success. Our research, informed by economic theories, compellingly illustrates that among other things changing requirements stems from missing protection on knowledge. In this paper, we present an analysis of knowledge difficult to protect. Both parties must share knowledge during the specification of requirements. However, this business knowledge is an essential intellectual property, and thus needs protection for misuse. We enact a strategy to achieve SDPs success despite these barriers. Our theoretical and empirical analysis also found that SDP success is largely an uncertainty problem between the contractors on the management level, and thus technical-organizational approaches alone are inadequate for achieving success. Based on property rights theory, we introduce two models for protecting knowledge depending on uncertainties. Our findings offer managers important insights into how they can design and enact FPC for effectively manage SDPs. Further, we show how the economic theories can enhance understanding of SDP dynamics and advance the development of a theory of effective control of SDP success.