Make-buy decisions in the face of radical innovations.

Some research in the area of make-buy decisions for new technologies suggests that it is a goodidea for a company to pursue a fairly rigorous “make” policy in the early days of a potentiallydisruptive innovation. Other studies prescribe exactly the opposite, promoting instead a “buy”strategy. This lack of convergence points to the fact that the scheme of categorization used toanalyze make-buy decisions in the face of radical innovations is not yet complete. Accordingly,this thesis builds upon prior work on make-buy decisions and disruptive technologies, andconstructs two new hypotheses by introducing evidence from research in the areas of (1) supplierrelationships and (2) industry clockspeed.Using a three-phase research design involving both case studies and a survey, this research showsthat close relationships between customer firms and principal suppliers that are built on trust andpersonal relationships do not play an important long-term role in the development of radicalinnovations. Thus, while previous research in this area underlines the value of these relationshipsduring the day-to-day operations of a business, this evidence draws into question whether they arehelpful in the face of a radical innovation.The results also show that an industry’s clockspeed has no significant bearing on the success orfailure of any particular make-buy strategy for a radical innovation. Because many of theprescriptive frameworks and strategic formulas put forward in the literature for make-buydecisions involving radical innovations are based on observations from fast clockspeed industries,this conclusion effectively broadens the potential applicability of prior research in this area.