Protection of Customers’ and Suppliers’ Knowledge in Software Development Projects with Fixed-Price Contract: Using Property Rights Theory

Abstract

Abstract. In software development projects (SDP), both the supplier and the customer must share their business knowledge for reaching the project success. However, this business knowledge is an essential intellectual property, and thus needs protection from misuse. In this paper, we present an analysis of knowledge difficult to protect. 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 contractual parties 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 how they can design and enact especially fixed-price contracts. Moreover, 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.