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What you are referencing is the historical-critical method of biblical interpretation. That approach has varying degrees of denying the supernatural element in Scripture, including verbal inspiration. That approach also includes the source theory you mentioned.

WELS rejects the historical-critical method of biblical interpretation. Our approach is called the historical-grammatical method (also known as the historical-grammatical-scriptural or the grammatical-historical method). That approach believes in the supernatural elements in Scripture, including plenary verbal inspiration. That approach believes that the Holy Spirit guided the four gospel writers in their writings, instead of thinking that one writer copied another’s work. That approach especially focuses on letting Scripture interpret Scripture.

You may or may not be aware of a book written by a person who served at our seminary and taught biblical interpretation. The book is available from Northwestern Publishing House and can be accessed via this link.

God’s word is truth (John 17:17). Faithful biblical interpretation acknowledges that and seeks to understand God’s intended meaning through his inspired writers—each of whom wrote under the guidance of the Holy Spirit (2 Peter 1:21).