What is it about?

In this article, we develop and test a novel theoretical framework related to a phenomenon called plural sourcing. Plural sourcing means that firms simultaneously make internally and buy externally the same thing. Our framework explains how plural sourcing firms strike the make-and-buy balance. We think that balance depends on a firm's contracting strategy. The focal firm’s choice of a supplier contracting strategy. Some firm's prefer to contract with many smaller, specialized suppliers, and then discard those suppliers after a short period. We call this a "bargaining" strategy. Other firms prefer to contract with a few larger, general purpose supplier, and keep them around for a long period. We call this a "relationship" strategy. We think that plural sourcing firms with a bargaining strategy make internally more than they buy externally. We think the opposite plural sourcing balance is struck by relationship-based plural sourcing firms. We find support for our framework predictions when analyzing how Fortune 500 firms make and buy the same legal services in the 1990s and 2000s.

Featured Image

Why is it important?

Balancing insourcing and outsourcing is central to organisations' competitive advantage in all sectors, manufacturing and services, in private sector and public sector.

Perspectives

I enjoyed studying this phenomenon in part because I teach and do research in both a business school and a law school. This research combines those interests in ways I think interesting to both schools and their professional constituencies.

Paul Vaaler
University of Minnesota Twin Cities

Writing this article was a great pleasure; collaborating with co-authors with complementary skills was a lot of fun. The empirical context --- corporate legal services and patent prosecution -- was not the easiest, and we hope that this spurs more people to develop data in this field.

Mari Sako
University of Oxford

Read the Original

This page is a summary of: How Do Plural-Sourcing Firms Make and Buy? The Impact of Supplier Portfolio Design, Organization Science, September 2016, INFORMS,
DOI: 10.1287/orsc.2016.1079.
You can read the full text:

Read

Contributors

The following have contributed to this page