Make, Buy or Share

Abstract

In this paper a sourcing decision framework is developed combining the resource based view, transaction cost economics and production economies. The combined theories are used to provide a sequential application of the main arguments of resource based view, transaction cost theory and production cost theory to decide on making, buying or sharing an activity. A further key contribution of this paper is the introduction of share as an alternative to make or buy. Share means the bundling of resources between competitors and reflects the importance of cooperation between competitors as a way of improving the efficiency of production. The developed framework regards IT as a portfolio of activities and can be used to evaluate which IT activities should be produced internally and whether cost savings expected from IT outsourcing may be realizable.