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In this research we reconcile two opposing views regarding the presence of economies or diseconomies of scale in new software development Our general approach hypothesizes a production function model of software development that allows for both increasing and decreasing returns to scale, and argues that local scale economies or diseconomies depend upon the size of projects. Using eight different data sets, including several reported in previous research on the subject. we provide empirical evidence in support of our hypothesis. Through use of the nonparametric DBA technique we also show how to identify the most productive scale size that may vary across organizations. These results are extended to include the effects of nonparametric scale-related factors, such as project duration and the number of new staff on the project team.
Banker et al. (Sun,) studied this question.