Firms' decisions to outsource or keep production in-house can impact their technological performance. Simply outsourcing or internalizing production doesn't guarantee better performance; it depends on how well the firm's decisions align with the risks involved in the contracts. Standard performance models can be misleading, as they may suggest a positive link between outsourcing and performance. However, taking into account specific features of the firm and the transactions involved reveals that the relationship is more complex. The key is to match governance decisions with the level of contractual risks to achieve optimal technological performance.