Testing alternative theories of the firm: transaction cost, knowledge‐based, and measurement explanations for make‐or‐buy decisions in information services.

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Presentation transcript:

Testing alternative theories of the firm: transaction cost, knowledge‐based, and measurement explanations for make‐or‐buy decisions in information services Poppo and Zenger (1998) presented by Yaxian Xie

Introduction Research Questions Contributions Considering competing/alternative explanations based on TCE, KBV and measurement issues, how is boundary choice driven by exchange attributes? Contributions Comparative examination DVs: Boundary choice governance performance (methodological difficulty)

A Model of Institutional Comparative Performance

Determinants of Comparative Performance Asset specificity Measurement difficulty Technological uncertainty Economies of scale Magnitude of skill set

Method Data Measurement (DVs) Key informant Sample: 1368 information service exchanges (across 152 companies) Measurement (DVs) Exchange Performance (common features across market and firm): overall cost; quality of output or service; responsiveness to problems or inquiries Boundary Choice Percentage of outsourcing Decision-making process measure

Results

Results (part)

Conclusions Findings Contributions Support TCE (asset specificity decreases market effectiveness) Consistent with agency theory and property rights (measurement difficulties decrease internal performance; NOT market performance) Boundary choices matter (markets and hierarchies possess different capacities with various exchange attributes) Contributions Comparative examination of multiple theories