How Does Outsourcing Affect Performance Dynamics?: Evidence From The Automobile Industry
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Overview: This paper examines the impact of vertical integration on the dynamics of performance in the context of automobile product development. Building on recent work in organizational economics and strategy, the researcher examine a number of detailed case studies to evaluate the relationship between vertical integration and different performance margins. On the one hand, outsourcing facilitates access to cutting-edge technology and the use of high-powered performance contracts. On the other hand, vertical integration allows firms to adapt to unforeseen contingencies and customer feedback, maintain more balanced incentives over the product lifecycle, and develop firm-specific capabilities over time.