COMPONENT KNOWLEDGE, EXPLORATORY LEARNING OPPORTUNITIES, AND SOURCING DECISIONS IN THE CONTEXT OF ARCHITECTURAL SHIFTS

Given the contradictory arguments and findings within the extant literature regarding the impact of a buy or make sourcing decision on performance in the face of architectural shifts by architectural innovations, this study attempts to provide hints as to under what conditions one particular sourcing strategy would be preferred over another by considering the in-house retention of knowledge regarding outsourced components and exploratory learning opportunities. Through an investigation of the U.S. bicycle derailleur and freewheel market, this study finds that firms pursuing a market mode while retaining knowledge regarding outsourced components in-house were likely to improve technological performances to the extent that they outperformed firms pursuing a hierarchy mode. In particular, regarding component knowledge, this study finds that design knowledge regarding outsourced components more significantly improved technological performance than patent-associated knowledge. Moreover, the more exploratory learning opportunities firms possessed when pursuing a make strategy, the more likely they were to improve technological performance to the extent that they outperformed firms pursuing a buy strategy. These findings are believed to contribute to a clearer understanding of the inconclusive and conflicting empirical results of the extant literature regarding the buy or make sourcing decision in the face of architectural shifts by architectural innovations.