Disentangling the Theories of Firm Boundaries: A Path Model and Empirical Test

Melissa A. Schilling () and H. Kevin Steensma ()
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Melissa A. Schilling: Management and Organizational Behavior, New York University, Tisch Hall, 40 West 4th Street, Suite 7-30, New York, New York 10012
H. Kevin Steensma: University of Washington, School of Business, Mackenzie Hall, Box 353200, Seattle, Washington 98195

Organization Science, 2002, vol. 13, issue 4, 387-401

Abstract: Theories on the motivation underlying firm boundaries have recently sparked renewed debate. What best explains whether a firm relies on market control or hierarchical control to secure required resources? How do the characteristics of the resources come into play? In this study, we consider a comprehensive path model of the governance mode decision for sourcing technological know-how. By integrating different perspectives on firm boundaries, including transaction cost economics, a resource-based view, and an options perspective, we link characteristics of the technology (i.e., uniqueness, barriers to imitation, commercial uncertainty, technological dynamism) to the perceived threat of opportunism, the potential for sustainable advantage, and the pursuit of a licensing agreement vis-à-vis the outright acquisition of the firm that possesses the desired know-how. We use structural equation modeling to analyze 127 sourcing arrangements. Our results show that technological dynamism and barriers to imitation indirectly influence the governance mode decision by increasing the perceived threat of opportunism. Commercial uncertainty directly influences the governance mode and decreases the likelihood of an acquisition vis-à-vis a licensing agreement. Although uniqueness and barriers to imitation are also positively associated with the perceived potential for sustainable advantage, the potential for sustainable advantage had no direct effect on governance mode. Implications and suggestions for further research are offered.

Keywords: Technology; Acquisitions; Licensing; Resource-Based View; Transaction Cost Economics; Options (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (44)

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