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Interorganizational cost management and relational context

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Many firms today form alliances with their suppliers and customers that do not fit into the classical dichotomy of hierarchies and markets. The emergence of so-called hybrid relational forms makes the make-or-buy decision more complicated than identified by the neo-classical economic perspective. One of the outcomes of these hybrid relational forms appears to be the development of cost management techniques that cross the organizational boundary between buyers and suppliers and whose objective is to reduce costs through collaborative efforts. This paper explores how firms enact interorganizational cost management during product design and the characteristics of the relational contexts associated with them. It also discusses the implications of such developments to the make-or-buy decision.

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