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Complementarity, capabilities, and the boundaries of the firm: the impact of within‐firm and interfirm expertise on concurrent sourcing of complementary components
Author(s) -
Parmigiani Anne,
Mitchell Will
Publication year - 2009
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.769
Subject(s) - complementarity (molecular biology) , outsourcing , industrial organization , modularity (biology) , business , order (exchange) , flexibility (engineering) , theory of the firm , production (economics) , marketing , microeconomics , economics , management , genetics , finance , biology
Theories of the firm raise conflicting arguments about how complementarities between two or more components affect firms' knowledge and production boundaries. Traditional arguments in the boundaries of the firm literature suggest that firms will tend to produce sets of complementary components internally, while more recent modularity studies argue that firms can outsource to gain flexibility. We resolve these views by examining concurrent sourcing, which arises when firms both make and buy the same components. We argue that concurrent sourcing of complementary components becomes more common in two cases: when firms have relevant knowledge about the components in conjunction with suppliers (interfirm expertise) and, perhaps more surprisingly, within the firm (within‐firm shared expertise). The results suggest that firms often need to make in order to know , but can partially outsource if they possess sufficient expertise. Copyright © 2009 John Wiley & Sons, Ltd.