Make-or-Buy Decisions in Patent Related Services

Abstract

Among the most prominent theoretical frameworks dealing with the economic underlyings of firms' make-or-buy decisions are Transaction Cost Economics (TCE) and the Resource Based View (RBV). Relying on panel data covering 107 European firms over eight years, I test predictions from both TCE and RBV with regard to the outsourcing of patent related services simultaneously. Modelling the share of outsourced patent applications in a Negative Binomial Panel Regression Model, I find joint explanatory power of both approaches. My findings support previous literature, arguing for an integration of TCE and RBV to a comprehensive theoretical framework of firms' make-or-buy decisions.

Keywords: outsourcing, make-or-buy, resource based view, transaction cost economics, patent attorney, IP department

JEL Classification: L22, L80, M21