Buying Modular Systems in Technology-Intensive Markets
Journal of Marketing Research, Vol. 40, pp. 335-350, August 2003
Posted: 12 Jan 2005
Technology-intensive markets consist of products that are often interdependent and operate together as a modular system. Although prior research addressed standardization and network externalities in such markets extensively, it has not addressed the buying of modular systems. The authors identify two focal decision dimensions of the buyer, namely the decision whether or not to outsource the system's integration and the decision of how much to concentrate the purchase of the system components to one or more suppliers. They develop a comprehensive production cost and transaction cost framework to explain companies' position on these two decisions. They find that especially leakage and presence of the buyer's know-how, together with the technological volatility it faces drive a buyer's preference for outsourcing system integration and purchase concentration of the system components. An empirical test in the market for telecom systems shows support for the theory developed.
Keywords: modular systems, high-tech marketing, buying behavior
JEL Classification: M31
Suggested Citation: Suggested Citation