Value Creation and Value Claiming in Make-or-Buy Decisions
36 Pages Posted: 20 Jan 2003
Date Written: 22 2002, 10
Abstract
Transaction value analysis (TVA) integrates the concepts of resourceheterogeneity 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 develophypotheses to explain the firm's intent to outsource applicationservices. A sample of 178 firms in the publishing and printingindustry in The Netherlands is used to test the hypotheses. This paperfinds that firms take both value-creation and value-claimingmotivations into consideration, with value creation having on averagea dominating impact, thus substantiating the TVA framework. However,we also find that if the risks of opportunism in outsourcingcontracting are high, value creation becomes the less important factorin make-or-buy decisions. Furthermore, the paper shows that the needfor flexibility is a major driver of governance choice forvalue-creation as well as for value-claiming motivations. Implicationsand future research directions are discussed.
Keywords: interorganizational strategy, make-or-buy decisions, transaction value analysis, outsourcing relationships, information technology
JEL Classification: M, L20, D23
Suggested Citation: Suggested Citation
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