The decision behind outsourcing New Product Development : An exploratory case study in the context of technical products

University essay from Karlstads universitet/Fakulteten för hälsa, natur- och teknikvetenskap (from 2013)

Abstract: In todays increased globalized business world and with a firms’ ongoing need for higher quality and lower costs, outsourcing is a popular strategy for companies to use. This thesis intends to study outsourcing in the context of new product development (NPD). The aim of this research is to contribute to the field of operations management. This is achieved by improving the understanding of decision-making during outsourcing NPD by investigating what factors affect the outsourcing decision. This will be fulfilled by addressing the research question What affect the choice between make or buy in outsourcing New Product Development?  By conducting an exploratory single case study and performing semi-structured interviews, the factors that influence decision-making in outsourcing of NPD could be generated. The findings show that competence, time, service, costs, strategy, and ability to collaborate with supplier were important factors that influenced the decision. The factors were analyzed and compared with transaction cost economics and resource-based views, which are theoretical perspectives commonly used to understand the firm’s strategical decisions. The factors from the findings were also used to conduct a cost model and a decision model. This can help a firm’s decision-making and increase the understanding of how the decision in outsourcing of NPD is made.  The results lend support to the argument that outsourcing decisions are complex. With different factors creating different influences, and all of them need to be considered in order to achieve a comprehensive understanding of the decision. The findings also suggest that no theoretical perspective can alone completely explain the decision of outsourcing NPD, they need to be integrated with another demand-oriented perspective. A recommendation for further research should be to investigate how the cost model and decision model could be implemented in practical situations and in different contexts. 

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