Despite the increased organizational spending on Information Systems DevelopmentrnOutsourcing (ISDO), ensuring ISDO success and delivering business values from such initiativernremains a challenge for business managers in a developing economy. In recent studies, there hasrnbeen much interest in addressing the challenge from the antecedents and consequences ofrnknowledge exchange between clients and vendors. However, a review of the literature onrnknowledge transfer and ISDO shows that most of the studies are (a) dominated by a onedirectionalrnknowledge transfer from or to one of the outsourcing parties; (b) focused onrnexamining ISDO success from either the clients' or vendors' perspective, but not both; (c)rnfocused on offshore ISDO context of developed economies. Although these earlier studies arernuseful, the direct transferability of the findings to the context of developing economy countriesrnsuch as Ethiopia is questionable. This is because ISDO arrangements in a developing economyrnare characterized by an immature ISDO market. Client organizations lack experience in how torngovern outsourced IS/IT initiatives and outsourcing partners usually demonstrate a lower level ofrnawareness about the value of knowledge due to unsupportive knowledge transfer culture.rnTherefore, research that investigates mutual ISDO success by addressing the limitations of priorrnresearch and capturing the significant context of developing economy through the lens of soundrnknowledge-related theories is needed. Thus, this study is set out to address the following researchrnquestions: (a) what are the key knowledge-related factors influencing onshore ISDO success? (b)rnhow are these factors interrelated? and (c) to what extent do these factors contribute to onshorernISDO success?rnA review of the literature on ISDO, knowledge exchange, and ISDO success was conducted.rnBased on the findings from the literature, an exploratory study, and drawing from knowledgebasedrnview and social exchange theories, a knowledge-based onshore ISDO success conceptualrnframework was developed from the client-vendor perspective.rnThis study was informed and guided by the positivist research paradigm. A mixed-methodsrnresearch strategy particularly a sequential transformative mixed method was employed. Thernfindings from the qualitative and exploratory study in Phase 1 were used as inputs in therndevelopment of the quantitative study in the second phase. Semi-structured interviews (10rnproject managers) and survey techniques were used to collect data in phases 1 and 2 respectivelyrnfrom the onshore ISDO practices in Ethiopia. SmartPLS 2.0 M3 statistical tool was used tornanalyze the survey data, assess the reliability and validity of the measurement model, and test thernhypothesized relationships in the proposed conceptual model.rnThe findings of the research show that onshore ISDO partners in a developing economy canrndeliver projects on time, increase their satisfaction with one another, and with the shared benefitrnand nurture long term partnership by (a) enhancing the utilization of knowledge transferredrnbetween vendors and clients; (b) developing their absorptive capacity, and (c) improving therneffectiveness of knowledge exchange. To do so, the development of mutual disseminativerncapacity, mutual absorptive capacity, mutual learning intent, and mutual competence trustrnbetween clients and vendors play a significant role and in turn, indirectly contribute to ISDOrnsuccess. Furthermore, the results of the study indicate that knowledge transfer and absorptiverncapacity contribute to knowledge utilization in onshore ISDO relationships. The findings alsornshow that knowledge utilization partially mediates the relationships between knowledge transferrnand ISDO success and mutual absorptive capacity and ISDO success. The study's results furtherrnsuggest that mutual disseminative capacity, mutual absorptive capacity, and mutual learningrnintent facilitate knowledge transfer. Lastly, the results also confirm that in a bi-directional flowrnof knowledge, knowledge recipientsâ€™ absorptive capacity necessitates mutual disseminativerncapacity, mutual learning intent, and mutual competence trust of outsourcing partners.rnThe research makes several contributions to ISDO research and practice. The overall findingsrnindicate that taking the client-vendor dyads, instead of either a client or vendor perspective,rnoffers a more complete picture of the knowledge dynamics that influence ISDO success. In termsrnof theory, the study contributes an onshore ISDO success framework to the ISDO literature in arndeveloping economy. The utility of this framework is demonstrated as the research modelrnexplains 53.5% of the variance in onshore ISDO success. In addition, the study contributesrnsufficiently contextualized, and research-ready instruments to operationalize constructs such asrnmutual knowledge dissemination, mutual absorptive capacity, mutual learning intent, mutualrncompetence trust, knowledge transfer, and utilization. Together, the framework and instrumentrnmay encourage future research.