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How Much You Know versus How Well I Know You: Selecting a Supplier for a Technically Innovative Component

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Author Info

  • Hoetker, Glenn

    (U of Illinois at Urbana-Champaign)

Abstract

I use transaction costs economics to model an assembler's choice of supplier for an innovative component. I extend the TCE model by drawing on the insights of the evolutionary view of strategy, which suggests a focus on the technical capabilities of potential suppliers, and the literature on interfirm relationships. Using information on the procurement of displays by notebook computer manufacturers, I find that assemblers always prefer a more technically capable supplier. As uncertainty increases, assemblers value prior transactions with a supplier. At higher levels of uncertainty, prior transactions become irrelevant and assemblers prefer internal suppliers. The model presented in this paper advances the theoretical frontiers of TCE, while expanding the range of managerial issues to which it can be applied.

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Bibliographic Info

Paper provided by University of Illinois at Urbana-Champaign, College of Business in its series Working Papers with number 02-0106.

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Date of creation: 2002
Date of revision:
Handle: RePEc:ecl:illbus:02-0106

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Web page: http://www.business.uiuc.edu/Working_Papers/Main.asp
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Cited by:
  1. Lokshin, Boris & Hagedoorn, John & Letterie, Wilko, 2011. "The bumpy road of technology partnerships: Understanding causes and consequences of partnership mal-functioning," Research Policy, Elsevier, vol. 40(2), pages 297-308, March.
  2. Kang, Min-Ping & Mahoney, Joseph T. & Tan, Danchi, 2007. "Why Firms Make Unilateral Investments Specific to Other Firms: The Case of OEM Suppliers," Working Papers 07-0110, University of Illinois at Urbana-Champaign, College of Business.
  3. Anderson, Edward & Coltman, Tim & Devinney, Timothy M. & Keating, Byron W., 2010. "What Drives the Choice of Third Party Logistics Provider?," MPRA Paper 40508, University Library of Munich, Germany.
  4. Marcus Wagner, 2008. "Technology sourcing by large incumbents through acquisition of small firms," SFB 649 Discussion Papers SFB649DP2008-055, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  5. Andreas Reinstaller, 2011. "The Modularity of Technology and Organisations. Implications for the Theory of the Firm," WIFO Working Papers 398, WIFO.
  6. Moeen, Mahka & Somaya, Deepak & Mahoney, Joseph T., 2011. "Supply Portfolio Concentration in Outsourced Knowledge-Based Services," Working Papers 11-0106, University of Illinois at Urbana-Champaign, College of Business.

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