Concurrent sourcing and supplier opportunism

The term 'concurrent sourcing' refers to the practice of a firm to simultaneously make and buy the same components. This paper presents an agency model for explaining how and when concurrent sourcing reduces the likelihood of external supplier opportunism. In the proposed model, the external supplier's expected costs of opportunism are determined as a product of four factors. These four factors are: buyer's likelihood of discovering supplier opportunism, buyer's internalised quantity as reaction to supplier opportunism, asset specificity of external supplier's investments, and multiplier effects. Each of these factors are explained and discussed in the paper. The paper also offers a number of theoretical and managerial implications.