Testing alternative theories of the firm: transaction cost, knowledge‐based, and measurement explanations for make‐or‐buy decisions in information services Poppo and Zenger (1998) presented by Yaxian Xie
Introduction Research Questions Contributions Considering competing/alternative explanations based on TCE, KBV and measurement issues, how is boundary choice driven by exchange attributes? Contributions Comparative examination DVs: Boundary choice governance performance (methodological difficulty)
A Model of Institutional Comparative Performance
Determinants of Comparative Performance Asset specificity Measurement difficulty Technological uncertainty Economies of scale Magnitude of skill set
Method Data Measurement (DVs) Key informant Sample: 1368 information service exchanges (across 152 companies) Measurement (DVs) Exchange Performance (common features across market and firm): overall cost; quality of output or service; responsiveness to problems or inquiries Boundary Choice Percentage of outsourcing Decision-making process measure
Results
Results (part)
Conclusions Findings Contributions Support TCE (asset specificity decreases market effectiveness) Consistent with agency theory and property rights (measurement difficulties decrease internal performance; NOT market performance) Boundary choices matter (markets and hierarchies possess different capacities with various exchange attributes) Contributions Comparative examination of multiple theories