Paper info

VALUE CREATION AND VALUE CLAIMING IN MAKE-OR-BUYDECISIONS: EVIDENCE FROM THE APPLICATION SERVICEINDUSTRY

ERNST VERWAAL, HARRY R. COMMANDEUR and WILLEM VERBEKE

The paper was published at the 21st IMP-conference in Rotterdam, Netherlands in 2005.

The present paper integrates the concepts of resource heterogeneity and transaction costs intoa single theoretical framework, which emphasizes both resource value maximization andtransaction costs efficiency in firms’ vertical integration decisions. From this theoreticalframework, we develop refutable implications to explain the firm’s intent to outsource applicationservices. A sample of 178 firms in the publishing and printing industry in The Netherlands isused to test the hypotheses. The results show that firms take simultaneously resource value andtransaction costs motivations into consideration, with resource value having on average adominating impact. However, we also find that if the transaction costs of contracting are high,the impact of resource value becomes moderated by transaction costs, supporting the view thatresource value maximization should take into account the impact of transaction costs.