Analysis of governance mode choices at the activity level

Various researchers have consistently called for theoretical explanations of firm boundary and governance mode choices that go beyond the truism that firms specialize in that what they are best capable of, transaction cost permitting. We thus develop a theoretical model that incorporates both transaction cost economics and an understanding of capabilities that produces competitive advantage/disadvantage. The result is an appreciation of which activities should be subject to four alternative governance modes –buy, concurrent sourcing, make, and concurrent exploitation. The logic of each of these and appropriate evidence is derived from the literature.