Value Creation and Value Claiming in Make-or-Buy Decisions

36 Pages Posted: 20 Jan 2003

See all articles by Ernst Verwaal

Ernst Verwaal

Erasmus University Rotterdam (EUR) - Department of Strategic Management and Entrepreneurship; Queen's University Management School; Erasmus Research Institute of Management (ERIM)

Willem Verbeke

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Harry R. Commandeur

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM); Erasmus Research Institute of Management (ERIM)

Date Written: 22 2002, 10

Abstract

Transaction value analysis (TVA) integrates the concepts of resourceheterogeneity and transaction cost economics into a single framework,which emphasizes both value creation and value claiming in firms'vertical integration decisions. Using a TVA perspective, we develophypotheses to explain the firm's intent to outsource applicationservices. A sample of 178 firms in the publishing and printingindustry in The Netherlands is used to test the hypotheses. This paperfinds that firms take both value-creation and value-claimingmotivations into consideration, with value creation having on averagea dominating impact, thus substantiating the TVA framework. However,we also find that if the risks of opportunism in outsourcingcontracting are high, value creation becomes the less important factorin make-or-buy decisions. Furthermore, the paper shows that the needfor flexibility is a major driver of governance choice forvalue-creation as well as for value-claiming motivations. Implicationsand future research directions are discussed.

Keywords: interorganizational strategy, make-or-buy decisions, transaction value analysis, outsourcing relationships, information technology

JEL Classification: M, L20, D23

Suggested Citation

Verwaal, Ernst and Verbeke, Willem and Commandeur, Harry R., Value Creation and Value Claiming in Make-or-Buy Decisions (22 2002, 10). ERIM Report Series Reference No. ERS-2002-90-STR. Available at SSRN: https://ssrn.com/abstract=371033

Ernst Verwaal (Contact Author)

Erasmus University Rotterdam (EUR) - Department of Strategic Management and Entrepreneurship ( email )

RSM Erasmus University
Rotterdam, 3000 DR
Netherlands

Queen's University Management School ( email )

25 University Square
Belfast
United Kingdom

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Willem Verbeke

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Harry R. Commandeur

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

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