Knowledge Management and Quality Control in Software Outsourcing Projects

Thisarticledescribeshowentrepreneursfacecriticalrisksintermsofqualitycontrolandknowledge managementwhileoutsourcingsoftwaredevelopmenttoindependentserviceproviders.First,itis recommended that lump-sum payment contracts should be avoided since software development projectinvolvesuncertainty.Instead,avariablepaymentcontingentonobservedqualitycaninduce theserviceprovidertoexertoptimaleffortontheproject.Second,entrepreneursmustnotoverlook the importanceofprovidingeconomicincentives.Theycanprotect their intellectualpropertyby withholdingcriticalknowledgeandpayinginformationrentsintermsofhigherthanmarketwagesto theserviceproviders.Third,astartlingresultisthatalowwagenationisnotnecessarilytheoptimal locationtooutsourcesoftwaredevelopmentprojects.Thus,highwage-strongIPRnationsmightbe choseninsteadoflowwage-weakIPRnations.Finally,thearticleexplainstheapparentparadoxthat softwareprojectsareoftenoutsourcedtolocationsthatarecharacterizedbyweakintellectualproperty rightsregimeandhighpropensityofimitation. KeywORdS Intellectual Property Protection, Knowledge Management, Outsourcing Projects, Principal-Agent Model, Quality Control, Software Development

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