An Empirical Investigation of Outsourcing Decisions

Abstract

SUMMARY Eighty‐five make or buy decisions, each made in a different enterprise, were classified into three categories (items/services made, items/services bought, new items/services) according to the method of acquisition before the resolution of the make or buy issue. Information was collected on a number of variables and analyzed by statistical methods. Items/services made (subjected to make or buy investigations) are characterized by low product complexity and low commercial uncertainty. On the contrary, items/services bought and new items/services (subjected to make or buy investigations) are characterized by high product complexity and high commercial uncertainty. The involvement of functions and hierarchical levels in make or buy investigations for new items/services was found to be relatively low. This fact increases the risk of making erroneous decisions that have a serious impact on the competitive position and profitability of enterprises.

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