Does interfirm modularity complement ignorance? A field study of software outsourcing alliances

Abstract Knowledge‐intensive outsourcing alliances present outsourcers with a tension between simultaneously sharing enough private knowledge to accomplish alliance goals and safeguarding such knowledge against misappropriation. This study explores the perspective that increasing interfirm modularity lowers the need for interfirm knowledge sharing. Put another way, modularity complements outsourcee ignorance. Analyses of data on 209 alliances between U.S. firms and software services firms in Russia, Ireland, and India provide strong support for this idea. Our theoretical elaboration and empirical testing of the complementarities between modularity and outsourcee ignorance has significant implications for strategy theory, which are also discussed. Copyright © 2008 John Wiley & Sons, Ltd.