Policy and Strategy Perspectives
The McGill International Entrepreneurship series
Edited by Hamid Etemad and Richard Wright
Chapter 3: Integrated Outsourcing: A Tool for the Foreign Expansion of Small-business Suppliers
3. Integrated outsourcing: a tool for the foreign expansion of smallbusiness suppliers Sônia Dahab and José Paulo Esperança INTRODUCTION The ‘make-or-buy decision’ is a classical issue in management textbooks from such diverse ﬁelds as accounting, business strategy and corporate ﬁnance. However, the professional manager is usually restricted to the somewhat trivial suggestion of acting in whatever manner minimizes costs. Not only is cost diﬃcult to calculate, but there is also a signiﬁcant intertemporal dimension as an investment decision tends to be associated with the ‘make’ choice. Quite often, some level of investment is also required from the supplier, in the context of the ‘buy’ decision. The growing prominence of this topic in the research of the 1990s demonstrates that the answer to the ‘make-or-buy’ question is far from settled. It is also a fascinating topic from the researcher’s perspective, given the deep implications for understanding the nature and boundaries of the ﬁrm in the context of the markets versus hierarchies dichotomy (Williamson, 1975). From the corporate manager’s perspective, a revolution is in the making. A prime example is the sheer shift from manufacturing to buying found in such industries as car parts and packages. Data from The Carmaker (July 1997) show that the production of metal cans by companies in the American food industry has declined from 54 per cent in 1985 to a paltry 19 per cent in 1996. An article in the 5 September 2000 issue of The Economist tells of a signiﬁcant...
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