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Performance and survival implications of sourcing choice sequence across an architectural innovation life cycle
Author(s) -
Park WooYong,
Tangpong Chanchai
Publication year - 2021
Publication title -
journal of operations management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.649
H-Index - 191
eISSN - 1873-1317
pISSN - 0272-6963
DOI - 10.1002/joom.1134
Subject(s) - innovator , business , industrial organization , modular design , transaction cost , sequence (biology) , marketing , database transaction , standardization , computer science , finance , entrepreneurship , biology , genetics , programming language , operating system
This study investigates follower firms' make–buy sourcing choices and sequences in response to an architectural innovation by an innovator. We argue that the dynamic trade‐offs among knowledge acquisition, knowledge transformation, and transaction cost reduction underlie the performance impacts of make–buy sourcing choices and sequences across the architectural innovation life cycle. Using the data gathered from the gear‐shifting market of the U.S. bicycle industry, we empirically demonstrate that “buy” is a superior sourcing choice before key market‐winner features (i.e., dominant design) have emerged. After that, “make” becomes a superior choice. We then demonstrate that the “buy‐to‐make” sourcing sequence is associated with superior technological and financial performances in the postdominant design phase of the architectural innovation period, as well as with greater firm survival during the market shakeout in the later period of modular standardization. The theoretical and managerial implications of our findings are also discussed.