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The Process of Vertical Dis-Integration: An Evolutionary Perspective on Outsourcing

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  • Volker Mahnke

Abstract

It is argued that an evolutionaryperspective on firm boundaries with its strongfocus on knowledge, as well as processes ofsearch, learning and capability development isinstrumental in developing a theory of firmboundaries that is close to managerialconcerns. Building on insights in evolutionaryeconomics, propositions are developed regardingscope, speed, and switching costs in theprocess of vertical dis-integration of whichoutsourcing is a particular instance. Currenttheories of firm boundaries give indication whycertain activities might be candidates foroutsourcing by stressing efficiency gains interms of transaction and production costs. They overlook, however, that ``technologicallyseparable interface'' between activities might notbe available in codified form, and neglectlearning dynamics that lead to strategicconsequences in terms of capability developmentand adaptability in competitive environments ofvarying dynamics. An evolutionary perspectiveon vertical dis-integration recognises thatfirms make contractual commitments and partlytacit capabilities develop in a path-dependentmanner. The fact that the firm's past casts ashadow on current governance options, andpossibilities to realise them, complicates theprocess of governance change and imposesswitching costs that impact the scope and speedof vertical dis-integration. An evolutionaryperspective on vertical dis-integration alsosuggests considering long-term consequences ofoutsourcing decisions on the dynamiccapabilities of the firm. Copyright Kluwer Academic Publishers 2001

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  • Volker Mahnke, 2001. "The Process of Vertical Dis-Integration: An Evolutionary Perspective on Outsourcing," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 5(3), pages 353-379, September.
    • Handle: RePEc:kap:jmgtgv:v:5:y:2001:i:3:p:353-379
    DOI: 10.1023/A:1014003229386
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    2. Mikkel Lucas Overby, 2005. "Partner Selection Criteria in Strategic Alliances When to Ally with Weak Partners," DRUID Working Papers 05-07, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    3. Spithoven, André & Teirlinck, Peter, 2015. "Internal capabilities, network resources and appropriation mechanisms as determinants of R&D outsourcing," Research Policy, Elsevier, vol. 44(3), pages 711-725.
    4. Davide Antonioli & Massimiliano Mazzanti & Sandro Montresor & Paolo Pini, 2015. "Outsourcing and Firm Productivity in a Specific Local Production System: Evidence from Reggio Emilia (Italy)," Growth and Change, Wiley Blackwell, vol. 46(2), pages 292-320, June.
    5. Alex Osadchyy & Jon Webber, 2016. "A Practical Management System For The Effective Use Of Offshore Software Project Opportunities," Review of Business and Finance Studies, The Institute for Business and Finance Research, vol. 7(1), pages 1-17.
    6. Byungjoo Paek & Joohyun Kim & Joonyoung Park & Heesang Lee, 2019. "Outsourcing Strategies of Established Firms and Sustainable Competitiveness: Medical Device Firms," Sustainability, MDPI, vol. 11(17), pages 1-28, August.
    7. Wolfgang Kerber & Simonetta Vezzoso, 2004. "EU Competition Policy, Vertical Restraints, and Innovation: An Analysis from an Evolutionary Perspective," Marburg Working Papers on Economics 200414, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    8. Cusmano, Lucia & Mancusi, Maria Luisa & Morrison, Andrea, 2009. "Innovation and the geographical and organisational dimensions of outsourcing: Evidence from Italian firm-level data," Structural Change and Economic Dynamics, Elsevier, vol. 20(3), pages 183-195, September.
    9. Consoli,Davide & Elche,Dioni, 2014. "An analysis of the knowledge base of Scientific Research & Development Business Services," INGENIO (CSIC-UPV) Working Paper Series 201401, INGENIO (CSIC-UPV).

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