Strategic sourcing of multicomponent software systems: The case of electronic medical records

Abstract The significance of information technology (IT) to organizational performance is increasingly acknowledged by senior executives and scholars alike. However, an important aspect that is underdeveloped in the extant literature is whether and how an organization's IT sourcing strategy affects performance. We examine this dimension in the context of hospitals’ sourcing strategy for electronic medical record (EMR) systems. Leveraging the organization‐IT alignment principle grounded in contingency theory, we argue that the sourcing strategy chosen by hospitals impacts the quality of patient care rendered and that the nature of this relationship has changed over time. Using data on US hospitals that operated continuously from 2006 to 2013 and employing a multilevel longitudinal modeling framework to analyze change over time, we examine how a key dimension of the sourcing strategy for EMR systems—change in closeness to single‐sourcing—impacts conformance quality, a critical measure of hospital performance that assesses how frequently hospitals comply with evidence‐based practices. We find that a change closer to single‐sourcing is positively associated with conformance quality, but this positive effect is reduced over time, meaning that the benefits realized by hospitals using a single‐sourcing approach diminish toward the end of our observation period. As explicated in our discussion of results, findings from our research reveal critical insights about how sourcing decisions impact performance, and how these effects evolve over time due to changes in regulations, technology, and competition.