Understanding the manufacturing location decision: the case for the transaction cost and capability perspectives

Research output: Contribution to journalArticle

41 Citations (Scopus)

Abstract

This paper highlights the value of employing the resource-based view (RBV) and transaction cost economics (TCE) to understand the manufacturing location decision. The RBV can assist with analyzing manufacturing capabilities, which can link the decision with performance and the competitive position of the organization. TCE provides a powerful theoretical lens to augment this analysis. Understanding transaction costs allows an organisation to adopt a relationship strategy, which reduces the risks of outsourcing whilst at the same time leverage the specialist capabilities of suppliers. Moreover, further research is required to enhance our understanding of how the variables from the RBV and TCE interact in sourcing decisions. In particular, it is argued that employing these theories in the manufacturing location decision would contribute to the academic debate on the complementary and contradictory prescriptions of TCE and the RBV in outsourcing decision-making contexts.
LanguageEnglish
Pages23-26
JournalThe Journal of Supply Chain Management
Volume49
Issue number2
DOIs
Publication statusAccepted/In press - 9 Dec 2012

Fingerprint

Economics
Outsourcing
Costs
Lenses
Decision making
Transaction costs
Resource-based view
Manufacturing
Transaction cost economics
Location decision
Sourcing decisions
Prescription
Leverage
Suppliers

Keywords

  • Manufacturing location decision
  • nearshore
  • offshore
  • resource-based view
  • transaction cost economics.

Cite this

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title = "Understanding the manufacturing location decision: the case for the transaction cost and capability perspectives",
abstract = "This paper highlights the value of employing the resource-based view (RBV) and transaction cost economics (TCE) to understand the manufacturing location decision. The RBV can assist with analyzing manufacturing capabilities, which can link the decision with performance and the competitive position of the organization. TCE provides a powerful theoretical lens to augment this analysis. Understanding transaction costs allows an organisation to adopt a relationship strategy, which reduces the risks of outsourcing whilst at the same time leverage the specialist capabilities of suppliers. Moreover, further research is required to enhance our understanding of how the variables from the RBV and TCE interact in sourcing decisions. In particular, it is argued that employing these theories in the manufacturing location decision would contribute to the academic debate on the complementary and contradictory prescriptions of TCE and the RBV in outsourcing decision-making contexts.",
keywords = "Manufacturing location decision, nearshore, offshore, resource-based view, transaction cost economics.",
author = "Ronan McIvor",
note = "Reference text: Barney, J. B. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17, 99–120. CrossRef | Web of Science{\circledR} Times Cited: 6660 Coates, T. T., & McDermott, C. M. (2002). An exploratory analysis of new competencies: A resource-based perspective. Journal of Operations Management, 20, 435–450. CrossRef | Web of Science{\circledR} Times Cited: 35 De Treville, S., & Trigeorgis, L. (2010). It may be cheaper to manufacture at home. Harvard Business Review, 88 (10), 84–87. McIvor, R. (2009). How the transaction cost theories and resource-based theories of the firm inform outsourcing evaluation. Journal of Operations Management, 27, 45–63. CrossRef | Web of Science{\circledR} Times Cited: 25 Peteraf, M. A. (1993). The cornerstones of competitive advantage: A resource-based view. Strategic Management Journal, 14, 179–191. Wiley Online Library | Web of Science{\circledR} Times Cited: 1684 Pisano, G., & Shih, W. (2012). Does America really need manufacturing? (pp. 94–102). March: Harvard Business Review. Web of Science{\circledR} Porter, M., & Rivkin, J. (2012). Choosing the United States (pp. 80–93). March: Harvard Business Review. Web of Science{\circledR} Times Cited: 1 Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic Management Journal, 18, 509–534. Wiley Online Library | Web of Science{\circledR} Times Cited: 3909 Vastag, G. (2000). The theory of performance frontiers. Journal of Operations Management, 3, 353–360. CrossRef | Web of Science{\circledR} Times Cited: 21 Williamson, O. E. (1975). Markets and hierarchies. New York: Free Press. Williamson, O. E. (1985). The economic institutions of capitalism: Firms. Markets and Relational Contracting, New York: Free Press.",
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