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Outsourcing suppliers as downstream competitors: Biting the hand that feeds

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  • Lim, Wei Shi
  • Tan, Soo Jiuan

Abstract

In this paper, we highlight an aspect of supplier opportunism in the outsourcing paradox that has largely been ignored by extant research - the supplier as a direct competitor of the buyer firm. In light of this paradox, we offer a game-theoretic framework in which we identify conditions under which firms could alleviate or mitigate this outsourcing problem. Our results show that apart from transaction costs, firm-level capabilities (both ordinary and dynamic) play important roles in determining the make only, buy only, or make-and-buy options a firm could exercise in countering the threat of the supplier as a potential competitor in the downstream marketplace.

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  • Lim, Wei Shi & Tan, Soo Jiuan, 2010. "Outsourcing suppliers as downstream competitors: Biting the hand that feeds," European Journal of Operational Research, Elsevier, vol. 203(2), pages 360-369, June.
    • Handle: RePEc:eee:ejores:v:203:y:2010:i:2:p:360-369
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