Concurrent sourcing as a termination safeguard
by Niels Peter Mols; Paula Sarita Bigio Schnaider
International Journal of Procurement Management (IJPM), Vol. 17, No. 1, 2023

Abstract: This paper discusses the conditions under which concurrent sourcing is an effective safeguard. Relying on the transaction cost and the resource-based theories, we develop a conceptual model to argue that concurrent sourcing shortens the period that a buyer needs in order to internalise production and thus, it shortens the period in which an external supplier is able to hold-up a buyer. Concurrent sourcing also allows for short run expansion of production and reduces costs of lost customers. However, when complementarities and diseconomies of scale make concurrent sourcing an efficient choice for a buyer, the same complementarities and diseconomies of scale also weaken the threat that the internal production unit may replace the external supplier.

Online publication date: Fri, 14-Apr-2023

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