Strategic Sourcing Theory and Evidence from Economics and Business Management

by Pint, Ellen M.; Baldwin, Laura H.

• ISBN13: 9780833025333
• ISBN10: 0833025333
• Format: Paperback
• Copyright: 1997-12-02
• Publisher: RAND Corporation

Summary

This report discusses the recommendations of the economics and business management literature on issues related to outsourcing.

Table of Contents

Preface	p. iii
Summary	p. vii
Acknowledgments	p. xi
Abbreviations and Acronyms	p. xiii
Introduction	p. 1
Strategic Sourcing: Theory and Evidence from Economics and Business Management	p. 1
Outline	p. 2
Transaction Cost Economics	p. 3
Transactions Can Be Internal or External to an Organization	p. 3
The Air Force Has Many Options for Organizing Transactions	p. 4
Characteristics of Transactions Can Affect Transaction Costs	p. 6
Each Governance Structure Has Strengths and Weaknesses	p. 8
Efficient Governance Structure Depends on Characteristics of Transaction	p. 10
Empirical Evidence on Transaction Cost Theory	p. 12
Outline	p. 12
Empirical Evidence Is Consistent with the Predictions of TCE	p. 13
Asset Specificity Makes Outsourcing More Difficult	p. 15
Contracts Can Be Tailored to Fit the Characteristics of Transactions	p. 17
Timing and Reputation Can Influence Outsourcing Decisions	p. 20
The Business Management Literature	p. 22
Outline	p. 22
Identify the Organization's Core Competencies	p. 23
Reducing Costs Should Not Be the Only Objective of Outsourcing	p. 25
Forming Strategic Alliances with Suppliers Can Enhance the Benefits of Outsourcing	p. 27
Strategic Alliances May Not Be Appropriate in Some Circumstances	p. 30
Source Selection Should Fit Strategic Needs	p. 33
Good Management Can Increase the Likelihood of Successful Long-Term Relationships	p. 36
Full Costs and Benefits of Outsourcing Are Difficult to Measure	p. 39
Evidence from the Business Management Literature	p. 41
Outline	p. 41
Business Case Studies Tend to Confirm Economic and Business Management Theories	p. 42
Vertical Integration Is Used to Retain Core Competencies and Lower Transaction Costs	p. 44
More Uncertainty or Bargaining Power Implies Less Vertical Integration	p. 46
Structure and Autonomy of Strategic Alliances Should Be Tailored to Economic Environment	p. 49
Buyer/Supplier Relationships Can be "Exit" or "Voice"	p. 52
Air Force Currently Uses Exit Strategy with Support Services Contractors	p. 54
Voice Relationships Promote Investment and Improved Performance	p. 57
Converting to Voice Relationships Requires Long-Term Commitments to Suppliers	p. 62
Source Selection Should Focus on Long-Term Relationships with High-Quality Suppliers	p. 65
Gain-Sharing Motivates Suppliers to Invest in Process Improvement	p. 69
Implications for the Air Force	p. 72
Outline	p. 72
Core Competences and Asset Specificity Influence Sourcing Decisions	p. 73
Good Source Selection and Contract Design Can Improve Performance	p. 75
Treat Suppliers of Complex Services as Partners, Not Arm's-Length Vendors	p. 77
Bibliography	p. 81
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