The performance impact of core component outsourcing: insights from the LCD TV industry

Viswanathan, M, Mukherji, P, Narasimhan, O and Chandy, R K (2021) The performance impact of core component outsourcing: insights from the LCD TV industry. Journal of Marketing Research. ISSN 0022-2437 (In Press) OPEN ACCESS

Abstract

Firms in technology markets often outsource the manufacture of core components – components that are central to product performance and comprise a substantial portion of product costs. Despite the strategic importance of core component outsourcing, there is little empirical evidence (and many conflicting opinions) about its impact on consumer demand. We address this gap with an examination of panel data from the flat panel television industry, across key regions globally. Results from our estimation indicate that core component outsourcing reduces the firm’s ability to be on the technological frontier; this hurts demand, because our estimates suggest that consumers care about firms being on the frontier. On the other hand, such outsourcing also reduces costs. Finally, we find that outsourcing increases the intensity of competition in the marketplace. We assess these (often opposing) effects, and conduct thought experiments to quantify the performance impact of core component outsourcing.

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Item Type: Article
Subject Areas: Marketing
Additional Information:

© 2021 American Marketing Association and SAGE Publications.  Re-use of this article is restricted to non-commercial and no derivative uses.

Accepted for publication in the Journal of Marketing Research

Date Deposited: 29 Mar 2021 08:15
Date of first compliant deposit: 26 Mar 2021
Subjects: P > Performance
O > Outsourcing
C > Competition
T > Technology
Last Modified: 06 Aug 2021 00:19
URI: https://lbsresearch.london.edu/id/eprint/1736
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