External technology sourcing: The effect of uncertainty on governance mode choice

Abstract

This study examines the effect of external and relational uncertainly on the governance choice for inter-firm technology sourcing. Based on transaction cost economics (TCE) and real options theory (RO), we develop a number of hypotheses about the impact Of environmental turbulence, technological newness, technological distance and prior cooperation on the choice between different governance modes. Data about deals in the pharmaceutical industry do not provide evidence for a continuum from less to more integrated sourcing modes. However, we find that the ranking depends on the type of uncertainty indicating that firms tackle different types of uncertainty with different governance modes.