Surviving a Crisis? Make or Buy Decisions in Innovative Industries and Their Effects on Supply Chain

Abstract

Many studies have shown how supply systems in innovative industries have became crucial for large firms to be competitive. Nevertheless, most of these studies refer to supply systems that were developed over a long period of economic growth. It is not yet evident how an economic slow down could modify supplier-customer relationships. This aspect is even more important if the fact that a number of large firms that developed integrated supply systems find themselves facing declining markets today is considered. The aim of this paper is to ascertain if the supply systems continue to evolve towards more complete form of collaboration between firms or if, on the contrary, the customer reinstates the activities given to the supplier during periods of crisis. The impact of economic crisis on supply systems has been studied by examining the results of a field survey concerning the supply systems of two companies in high-tech industries. It emerges that in a period of profound crisis the customer passes its own difficulties onto the suppliers and, in particular, to the firms which have invested most in the relationship. This paper also highlights that customers continually revise and modify their make-or-buy strategy, highlighting dangers for suppliers in on over-reliance on one customer.

Key words:

• Customer-supplier relationships
• Industrial innovation
• Supply chains
• Technology