Sourcing strategies of US service companies: A modified transaction-cost analysis

Global procurement of services has been receiving an increasing amount of m anagerial attention in recent years. Service firms seem to have begun sourc ing part of their service activities from abroad in much the same way as ma nufacturing firms have sourced components and finished goods in the past 30 years. However, little is known about the nature of service sourcing strat egy. In this study, we employ a modified transaction-cost analysis to exami ne empirically the locational (domestic vs, global sourcing) and the owners hip (internal vs. external sourcing) aspects of service sourcing strategy. In addition, performance implications on both the locational and ownership aspects of service sourcing are investigated. The results show that, simila r to components and finished goods procurement, supplementary services are sourced globally, either internally or externally. Furthermore, the relatio nship between asset specificity and internal sourcing of supplementary serv ices is moderated by the level of inseparability and transaction frequency. Finally, internal sourcing and foreign sourcing of supplementary services are negatively related to a service's marker performance. Copyright (C) 199 9 John Wiley & Sons, Ltd.