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Product Architectures and Sourcing Decisions

The relationship between product architecture (PA) and a firm’s make or buy (M-B) sourcing decision has been a topic of interest over the past several years. However, the interplay between PA and a firm’s M-B decision and its impact on performance is still underexplored. This study draws on transaction cost economics and the knowledge-based view within the framework of the PA and sourcing strategy literature to develop a causal model concerning the relationship between PA and the M-B sourcing decision and its implication for technological and financial performance via an investigation of the bicycle freewheel and derailleur markets from 1980 to 1995. The study readily provides theoretical reasoning as to why firms should choose an M-B sourcing strategy in the context of integral-modular PAs. It also suggests the need for further theoretical and empirical investigation of the relationships between PA type and the M-B choice and of the resulting impact of the sourcing decision on performance.