Supplier Competition Uncertainty And Make Or Buy Decisions
Supplier Competition Uncertainty And Make Or Buy Decisions
Gordon Walker
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Technological change implies retooling which, for the components in the sample, is paid for by the buyer whether the component is made or bought. Furthermore, if the product ia bought, the supplier may have an opportunity to respecify the terms of the contract. When vendor market competition is low, the supplier may take advantage of this opportunity to exploit the limited alternatives available to the buyer which consequently must increase the effort it expends in contract specification and mo...nitoring. As Che costs of market contracting rise, in-bouse production should become a more attractive alternative. Production Costs Finally, the influence of comparative production costs on make or buy decisions should be significant (see Williamson, 1981; Walker and Weber, 1984). The magnitude of this effect should should not be different, however, across high and low competition supplier markets. DATA AND METHODS The sample consists of sixty decisions made by a formal make or buy committee composed of managers from purchasing, finance, sales, product engineering, manufacturing engineering and quality assurance.
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