Supply Portfolio Concentration in Outsourced Knowledge-Based Services
40 Pages Posted: 16 Feb 2010
Date Written: February 15, 2010
The vertical integration literature has examined outsourcing decisions mainly to understand the extent to which a firm engages in outsourcing. The question of how the firm's portfolio of outsourced work is managed across suppliers has been relatively understudied. This paper examines factors that influence how outsourced knowledge-based service work is distributed among suppliers. Our focal interest is in predicting when outsourcing will be concentrated in a smaller number of suppliers. Using data on the outsourcing of patent legal services, we find empirical evidence that high firm specificity of the outsourced work, high reliance on outsourcing and domain focus of outsourced activities positively influence the concentration of outsourced work in the hands of fewer suppliers.
Keywords: outsourcing, knowledge-based services, supplier management, transaction cost economics
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