Product Complexity and Mode Choice in Global Product Development
Author(s)Makumbe, Pedzi; Seering, Warren; Rebentisch, Eric
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Despite the growth in the practice of global product development, little work has been done to understand factors that influence mode choice in global product development. Our research fills this gap in the literature by empirically investigating variables that drive firms to either globally outsource, globally partner or develop modules themselves in a foreign country. We assume a product-centric view, and combine the transaction cost theory and the resource based view of the firm to explain mode choices based on the analysis of electromechanical products developed across Asia, Europe, the Middle East, and South America for (or by) American firms. Though we focus on complexity, we address product content specificity, product strategic importance and designer’s technological capability as well. We find significant relationships between the type of global product development and the product characteristics. However, the significance of the relationship between complexity and the mode varies by region when we divide the world into emerging countries and mature countries. While the relationship is significant in the emerging countries, it is not significant in mature countries. These findings have implications for decision making in systematically assigning modes of development to different products being developed globally.
global product development, global outsourcing, product complexity, make or buy
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