Do make or buy decisions matter? The influence of organizational governance on technological performance

• Published in: Strategic management journal Vol. 23; no. 9; pp. 817 - 833
• Main Authors: Leiblein, Michael J., Reuer, Jeffrey J., Dalsace, Frédéric
• Format: Journal Article
• Language: English
• Published: Chichester, UK John Wiley & Sons, Ltd 01-09-2002; John Wiley and Sons; Wiley
• Subjects: Applied sciences; Business administration; Buy or make decisions; Corporate governance; Corporate strategies; Decision making; domain_shs.gestion.mark; Exact sciences and technology; Firm modelling; Governance; Humanities and Social Sciences; Industrial production; innovation; Management; Management science; Operational research and scientific management; Operational research. Management science; Organizations; Outsourcing; Semiconductors; Technology; Transaction costs; Vertical integration; Innovation; Performance analysis; Outsourcing; Decision making; Enterprise organization; Firm strategy; innovation; outsourcing; vertical integration
• ISSN: 0143-2095; 1097-0266
• DOI: 10.1002/smj.259

This paper investigates how firms' decisions to outsource or internalize production affect their technological performance. While several popular arguments and some anecdotal evidence suggest a direct association between outsourcing and technological performance, the effects of firms' governance decisions are likely to be contingent upon several specific attributes underlying a given exchange. This paper first demonstrates how standard performance models can improperly suggest a positive relationship between firms' outsourcing decisions and their technological performance. Models that account for firm- and transaction-specific features are then presented, which indicate that neither outsourcing nor internalization per se result in superior performance; rather, a firm's technological performance is contingent upon the alignment between firms' governance decisions and the degree of contractual hazards.