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Sourcing practices and boundaries of the firm in the financial services industry

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  • M. Hossein Safizadeh
  • Joy M. Field
  • Larry P. Ritzman

Abstract

We investigate sourcing decisions related to the back‐office operations of 108 processes used by financial services companies. Guided by the arguments of transaction cost economics and the resource‐based and knowledge‐based view of organizations, we hypothesize that service customization and volume represent two key drivers of a service company's sourcing decisions. The inherent uncertainty of service customization gives rise to the transaction cost risks of opportunism and holdups and thus favors insourcing. Moreover, the competency gained from performing high‐volume back‐office operations aligns with the tenets of the resource‐based view, which also favors insourcing. The empirical results corroborate these theoretical expectations. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • M. Hossein Safizadeh & Joy M. Field & Larry P. Ritzman, 2008. "Sourcing practices and boundaries of the firm in the financial services industry," Strategic Management Journal, Wiley Blackwell, vol. 29(1), pages 79-91, January.
    • Handle: RePEc:bla:stratm:v:29:y:2008:i:1:p:79-91
    DOI: 10.1002/smj.641
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    Cited by:

    1. Peters, Frank, 2018. "The business of video games is a multi-player game : Essays on governance choices and performance in a two-sided market in the cultural industries," Other publications TiSEM 886b3148-4bbb-4ea4-b666-0, Tilburg University, School of Economics and Management.
    2. Chou, Yon-Chun & Huang, Hsing-Yi & Jahn, John & Kuo, Chien-Hung, 2010. "A framework of economic analysis for tapered technology-manufacturing alliances," International Journal of Production Economics, Elsevier, vol. 127(2), pages 249-261, October.
    3. Chanson, Guillaume & Quélin, Bertrand V., 2013. "Decentralization and contracting out: A new pattern for internal and external boundaries of the firm," European Management Journal, Elsevier, vol. 31(6), pages 602-612.
    4. Stephan Manning & Silvia Massini & Carine Peeters & Arie Y. Lewin, 2018. "The changing rationale for governance choices: Early vs. late adopters of global services sourcing," Strategic Management Journal, Wiley Blackwell, vol. 39(8), pages 2303-2334, August.
    5. Pablo Ruiz & Ricardo Martinez & Job Rodrigo & Cristina Diaz, 2015. "Level of Coherence Among Ethics Program Components and Its Impact on Ethical Intent," Journal of Business Ethics, Springer, vol. 128(4), pages 725-742, June.
    6. repec:tkp:ijsrsy:v:2:y:2012:i:2:p:73-91 is not listed on IDEAS
    7. Marzieh ShahmariChatghieh & Harri Haapasalo & Anyanitha Distanont, 2013. "A Comparison of R&D Supply Chains and Service and Manufacturing Supply Chains," International Journal of Synergy and Research, ToKnowPress, vol. 2(2), pages 73-91.
    8. Ju, Min & Murray, Janet Y. & Gao, Gerald Yong & Kotabe, Masaaki, 2019. "Concurrent sourcing strategy of multinational firms in China: Drivers and performance implications," Journal of World Business, Elsevier, vol. 54(6), pages 1-1.
    9. Lim, Grace J.H. & Pitesa, Marko & Vadera, Abhijeet K., 2023. "Cheating constraint decisions and discrimination against workers with lower financial standing," Organizational Behavior and Human Decision Processes, Elsevier, vol. 174(C).
    10. Stephan Manning & Silvia Massini & Carine Peeters & Arie Lewin, 2012. "Global Co-Evolution of Firm Boundaries: Process Commoditization, Capabilities Development, and Path Dependencies," Working Papers CEB 12-009, ULB -- Universite Libre de Bruxelles.
    11. Leila Agha Kasiri & Shaheen Mansori, 2016. "Standardization, customization, and customer loyalty in service industry," Journal of Marketing Analytics, Palgrave Macmillan, vol. 4(2), pages 66-76, July.

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