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Trade-offs in Make–Buy Decisions: Exploring Operating Realities of Knowledge Integration and Innovation

Mandar Dabhilkar and Lars Bengtsson

in Knowledge Integration and Innovation

Published in print August 2011 | ISBN: 9780199693924
Published online September 2011 | e-ISBN: 9780191730580 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199693924.003.0010
Trade-offs in Make–Buy Decisions: Exploring Operating Realities of Knowledge Integration and Innovation

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This study explores trade-offs particularly relevant for firms that compete on innovation, but which have outsourced manufacturing and therefore need to integrate knowledge by involving their new contract manufacturers in the innovation and development activities of outsourced parts. The empirical analysis is based on survey data from 127 manufacturing firms in Sweden. The analysis shows that trade-offs remain in make–buy decisions, especially between cost and flexibility, and cost and speed. When comparing different groups of firms, the results also show that knowledge integration in terms of collaboration between outsourcing firms and their suppliers reduces some trade-offs but intensifies others. The chapter concludes that technology-based firms that compete on innovation often have to involve their new suppliers in the innovation and development activities of outsourced parts. However, when doing so, they have to consider that they cannot ‘have it all’ as the existing management literature often claims.

Keywords: trade-offs; operations strategy; competitive priorities; outsourcing; supply chain management

Chapter.  8194 words. 

Subjects: Innovation

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