Sourcing Strategies of Manufacturing Firms: Transaction Cost Implications

Developing the right sourcing strategy in managing the firm’s supplies is critical for today’s managers. They realize the long‐term impact of their sourcing strategies (make or buy, supply‐base structure, and nature of customer‐supplier relationship) on the profits and the efficient functioning of the organization. The study examines and evaluates changes in these strategic choices. The study revealed the following: small and lower labor productivity firms rate their internal suppliers better than external suppliers; obtaining supplies nationwide from a limited number of suppliers is the prevalent supply‐base structure; and customer‐supplier relationship is deepening.