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 INTRA-FIRM SOURCING

i.e. the “make” option or vertical


intergration

 INTER-FIRM SOURCING
i.e. the “buy” option from independent
suppliers/reliance upon market forces
 Internal sourcing increase in
multinational firms recently
 Firms adopt internal sourcing in the
production of propietary product to
protect advantages
 Affiliated firms react differently to
economic factors than unaffiliated
firms
 Roles of product, form and industry
characteristics on internal sourcing
 Determinants of internal sourcing of major
components and market performance
Product-related
variables:
Product innovation
Process innovation
Asset specificity
Global competitive
Firm-related variables: strategy: Performance:
Nationality Internal sourcing Strategic
Management Attitude of major Financial
components
Industry-related
variables:
Switching costs
Numbers of suppliers
Numbers of
substitutes
Product-related variables:
 Product innovation
H1a: product innovation positively related to
internal sourcing
 Process innovation
H1b: process innovation negatively related to
internal sourcing
 Asset specificity
H2: Asset specificity positively related to internal
sourcing
Firm-related variables:
 Management’s attitude
H3: Management’s favorable attitude is
positively related
 National Difference in Sourcing
Behavior
H4: Japanese MNC emphasis more than European
MNC.
Industry-related variables:
 Switching costs
H5a: Switching cost is positively related
 Number of suppliers
H5b: number of suppliers negatively related
 Number of substitutes
H5c: number of substitutes negatively related
 Product’s strategic market performance
H6a: positively related
 Product’s financial market performance
H6b: is not positively related.
 Sample: the global 500 in various
industries
 Measure: Multi-item measure in market
performance, product innovation and
process innovation
 Analysis results:
Significant : Process innovative, Asset specificity,
Management’s attitude, Nationality, Number of substitutes,
strategic dimension etc
Insignificant: Product innovation, Switching cost, number of
suppliers, financial dimension etc
1. Product and firm related variable more
significant than industry related variable
2. Internal sourcing appropriate if specific
assets used in a product; effective global
sourcing is securing management
involvement
3. Negative relationship both for no. of
substitutes and process innovation
4. Japanese MNC source more internally
5. Internal sourcing provides higher
strategic market performance
1. Cross sectional, failed to analysis the
nature of determinants
2. The sample only includes large firm,
not generalizable to small firms
3. Not covered quasi-firm or networking
source
4. Not study the firm’s competitive
strategy