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A bargaining perspective on strategic outsourcing and supply competition
Author(s) -
De Fontenay Catherine C.,
Gans Joshua S.
Publication year - 2008
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.697
Subject(s) - outsourcing , downstream (manufacturing) , upstream (networking) , industrial organization , competition (biology) , business , microeconomics , value (mathematics) , production (economics) , resource (disambiguation) , function (biology) , perspective (graphical) , vertical integration , novelty , knowledge process outsourcing , economics , marketing , computer science , computer network , ecology , machine learning , evolutionary biology , artificial intelligence , biology , philosophy , theology
This article considers the outsourcing choice of a downstream firm with its own upstream production resources or assets. The novelty of the approach is to consider the outsourced function as involving resources consistent with the resource‐based view of the firm. From a bargaining perspective, we characterize a downstream firm's decision whether to outsource to an independent or to an established upstream firm. In so doing, the downstream firm faces a trade‐off between lower input costs afforded by independent competition, and higher resource value associated with those who can consolidate upstream capabilities. We show that this trade‐off is resolved in favor of outsourcing to an established firm. Copyright © 2008 John Wiley & Sons, Ltd.