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Balancing vertical integration and strategic outsourcing: effects on product portfolio, product success, and firm performance
Author(s) -
Rothaermel Frank T.,
Hitt Michael A.,
Jobe Lloyd A.
Publication year - 2006
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.559
Subject(s) - outsourcing , vertical integration , portfolio , industrial organization , knowledge process outsourcing , business , product (mathematics) , strategic fit , marketing , strategic management , economics , finance , geometry , mathematics
Most prior research has focused on vertical integration or strategic outsourcing in isolation to examine their effects on important performance outcomes. In contrast, we focus on the simultaneous pursuit of vertical integration and strategic outsourcing. Our baseline proposition is that balancing vertical integration and strategic outsourcing in the pursuit of taper integration enriches a firm's product portfolio and product success, and in turn contributes to competitive advantage and thus to overall firm performance. We derive a set of detailed hypotheses, and test them on a unique and fine‐grained panel of longitudinal data documenting over 3,500 product introductions in the global microcomputer industry. The results provide strong support for the notion that carefully balancing vertical integration and strategic outsourcing when organizing for innovation helps firms to achieve superior performance. Copyright © 2006 John Wiley & Sons, Ltd.