Eliciting experts’ perceived risk of software offshore outsourcing incorporating individual heterogeneity

Experts’ perception of risk plays a more and more important role in software offshore outsourcing risk management. However, individual heterogeneity among experts in risk perception remains unexplored in the literature. This paper, for the first time, proposes a linear mixed model (LMM) approach to make individual heterogeneity explicit within the conjoint analysis experimental framework. The proposed model is estimated using an established dataset on Japanese software outsourcing risk perceiving, and the estimation results show that individual heterogeneity does exist. It is also revealed that requirement volatility is put to the highest priority in making software outsourcing decisions in Japan. We further apply the proposed model to test whether vendor country and software type preference exist in Japan’s software offshoring. We find that Japan’s seasoned managers hold quite neutral attitude toward both aspects.