Outsourcing suppliers as downstream competitors: Biting the hand that feeds

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...

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Bibliographic Details
Published inEuropean journal of operational research Vol. 203; no. 2; pp. 360 - 369
Main Authors Lim, Wei Shi, Tan, Soo Jiuan
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.06.2010
Elsevier
Elsevier Sequoia S.A
SeriesEuropean Journal of Operational Research
Subjects
Applied sciences
Buy or make decisions
Competition
Exact sciences and technology
Firm modelling
Game theory
Logistics
Operational research and scientific management
Operational research. Management science
Outsourcing
Outsourcing Supply chain management Supplier opportunism Game theory
Studies
Supplier opportunism
Supply chain management
Supplier opportunism
Supply chain management
Outsourcing
Game theory
Transaction cost
Machine feed
Subcontracting
Processing quality
Downstream
Logistics
Firm strategy
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Summary: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.
ISSN:0377-2217
1872-6860
DOI:10.1016/j.ejor.2009.08.006