Choosing Teams over Star Players: Strategic Selection of Supplier Teams in Customized Projects

46 Pages Posted: 2 Mar 2009

See all articles by Marko Madunic

Marko Madunic

Western Washington University

Glenn P. Hoetker

University of Illinois at Urbana-Champaign - Department of Business Administration

Joseph T. Mahoney

University of Illinois

Date Written: March 1, 2009

Abstract

What criteria do contractors/buyers apply when hiring teams of suppliers? This paper examines this important strategic question to shed light on buyer-supplier relation-ships and organization of interfirm governance structures. Three research literatures inform the model. Transaction costs theory analyzes the benefits of authority in attenuating opportunism; firm capabilities literature emphasizes relative selection competencies; and the interfirm relations literature posits the positive effects of past relationships. The central proposition is that buyers strategically hire teams of suppliers who engage in discrete, yet interdependent, customized-project activities. We examine criteria that buyers apply when contracting with teams of suppliers for components of low decomposability. Empirical findings show that contractors obtain knowledge of suppliers' capability to absorb and re-utilize team-specific knowledge in subsequent projects. Project contractors use this know-ledge to organize future teams. Moreover, the selection of suppliers depends on the nature of a component and the level of technological uncertainty.

Keywords: Customized project, decomposability, teams of suppliers, transaction costs

JEL Classification: L22

Suggested Citation

Madunic, Marko and Hoetker, Glenn Patrick and Mahoney, Joseph T., Choosing Teams over Star Players: Strategic Selection of Supplier Teams in Customized Projects (March 1, 2009). Atlanta Competitive Advantage Conference Paper. Available at SSRN: https://ssrn.com/abstract=1351563 or http://dx.doi.org/10.2139/ssrn.1351563

Marko Madunic

Western Washington University ( email )

516 High Street
Bellingham, WA 98225
United States

Glenn Patrick Hoetker

University of Illinois at Urbana-Champaign - Department of Business Administration ( email )

1206 South Sixth Street
Champaign, IL 61820
United States
217-265-4081 (Phone)

HOME PAGE: http://www.business.uiuc.edu/ghoetker

Joseph T. Mahoney (Contact Author)

University of Illinois ( email )

1206 South Sixth Street
339 Commerce West
Champaign, IL 61820
United States
217-244-7969 (Phone)
217-244-4102 (Fax)

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