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Firms increasingly acquire needed information technology (IT) products and services from external sources through the formation of partnerships. In spite of the ubiquity of IT outsourcing practice in today’s organizations however, theoretical understanding of IT partnerships in outsourcing is limited. Extant research has largely focused on the economic or strategic aspects of IT outsourcing, using transaction cost economics (TCE) and the resource-based view (RBV) as dominant theoretical frameworks. This dissertation adopts a social perspective to examine the IT outsourcing phenomenon. It focuses on IT partnerships in transformational outsourcing relationships that are interorganizational engagements formed to rapidly and substantially improve performance at the organizational level. By synthesizing the knowledge based view of the firm with the concept of social capital, I attempt to explain how IT outsourcing relationships generate value for organizations. I argue that IT outsourcing partnerships constitute a form of social capital for the firm that chooses to outsource, that facilitates knowledge exchange and transfer. The increased knowledge stock as a result of knowledge exchange and transfer, in turn, forms the foundation for IT value, which is manifested as success in business operations and IT-enabled innovation. T