The role of direct outsourcing in new product manufacturing strategy

ABSTRACTIn this study, we compare the direct outsourcing strategy with the indirect outsourcing strategy, whereby intermediaries are employed to carry out activities related to sourcing from suppliers. Specifically, we develop a theoretical framework and a set of propositions that focus on the impact of outsourcing knowledge, coordination capability, and organizational complexity on a firm's strategy regarding the employment of an intermediary during the determination of a manufacturer for its new product. Although direct outsourcing can provide some advantages over traditional indirect outsourcing, it is characterized by high levels of organizational complexity and may introduce new sources of supply risk. We discuss situations in which the direct outsourcing of new products can be advantageous as well as risk mitigating.