An empirical examination of transaction-and firm-level influences on the vertical boundaries of the firm

Michael J. Leiblein, Douglas Miller

Research output: Contribution to journalArticle

354 Scopus citations


A large literature has successfully employed transaction cost economic theory to describe how exchange conditions affect the optimal form of organization. However, this approach has historically not accounted for the influence of firm-specific attributes on the governance decision. This paper develops a model based on insights from transaction cost economics, the resource-based view, and real options theory to examine how transaction-level characteristics, firm-specific capabilities, and product-market scope influence the governance of production. Empirical evidence derived from analysis of 469 make-or-buy decisions involving 117 semiconductor firms indicates that decisions regarding the governance of production activities are strongly influenced by both transaction-and firm-level effects.

Original languageEnglish (US)
Pages (from-to)839-859
Number of pages21
JournalStrategic Management Journal
Issue number9
StatePublished - Sep 1 2003
Externally publishedYes


All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Strategy and Management

Cite this