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Value Creation and Value Claiming in Make-Or-Buy Decisions

Author

Listed:
  • Verwaal, E.
  • Verbeke, W.J.M.I.
  • Commandeur, H.R.

Abstract

Transaction value analysis (TVA) integrates the concepts of resource heterogeneity and transaction cost economics into a single framework, which emphasizes both value creation and value claiming in firms' vertical integration decisions. Using a TVA perspective, we develop hypotheses to explain the firm's intent to outsource application services. A sample of 178 firms in the publishing and printing industry in The Netherlands is used to test the hypotheses. This paper finds that firms take both value-creation and value-claiming motivations into consideration, with value creation having on average a dominating impact, thus substantiating the TVA framework. However, we also find that if the risks of opportunism in outsourcing contracting are high, value creation becomes the less important factor in make-or-buy decisions. Furthermore, the paper shows that the need for flexibility is a major driver of governance choice for value-creation as well as for value-claiming motivations. Implications and future research directions are discussed.

Suggested Citation

  • Verwaal, E. & Verbeke, W.J.M.I. & Commandeur, H.R., 2002. "Value Creation and Value Claiming in Make-Or-Buy Decisions," ERIM Report Series Research in Management ERS-2002-90-STR, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    • Handle: RePEc:ems:eureri:237
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    References listed on IDEAS

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    Cited by:

    1. Jakub Drzewiecki, 2021. "Empirical Verification of Relationship Between Organizational Boundaries, Business Model Change and Outsourcing Scope and Maturity," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 1), pages 1287-1311.
    2. Martin Falk, 2004. "ICT-Linked Firm Reorganisation and Productivity Gains," WIFO Working Papers 216, WIFO.

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    More about this item

    Keywords

    information technology; interorganizational strategy; make-or-buy decisions; outsourcing relationships; transaction value analysis;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics

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