The performance impact of core component outsourcing: insights from the LCD TV industry

Madhu Viswanathan, Prokriti Mukherji, Om Narasimhan and Rajesh Chandy

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Firms in technology markets often outsource the manufacture of core components—components that are central to product performance and comprise a substantial portion of product costs. Despite the strategic importance of core-component outsourcing, there is little empirical evidence (and many conflicting opinions) about its impact on consumer demand. The authors address this gap with an examination of panel data from the flat panel TV industry, across key regions globally. Results from their estimation indicate that core-component outsourcing reduces the firm’s ability to be on the technological frontier; this hurts demand, because the authors’ estimates suggest that consumers care about firms being on the frontier. However, such outsourcing also reduces costs. Finally, the authors find that outsourcing increases the intensity of competition in the marketplace. They assess these (often opposing) effects and conduct thought experiments to quantify the performance impact of core-component outsourcing.

Keywords: high technology markets; outsourcing; technology frontier (search for similar items in EconPapers)
JEL-codes: J01 R14 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2021-08
New Economics Papers: this item is included in nep-bec, nep-com, nep-eff and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Journal of Marketing Research, August, 2021, 58(4), pp. 801-826. ISSN: 0022-2437

Downloads: (external link)
http://eprints.lse.ac.uk/109853/ Open access version. (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:109853

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().