Do Make or Buy Decisions matter ? The Influence of Organizational Governance on Technological Performance

M. Leiblein, J. Reuer, F. DALSACE

Strategic Management Journal

September 2002, vol. 23, n°9, pp.817-833

Departments: Marketing

This paper investigates hors, 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 petformance 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 tire degree of contractual hazards.