Determinants of intra-firm sourcing and market performance

Earlier studies have shown that internal sourcing of major components has a direct bearing on the multinational firm's market performance. However, factors that affect the extent to which the firm employs intra-firm (internal) sourcing have not been explored. In this study, we examine the determinants of internal sourcing of major components, and revisit the relationship between internal sourcing of major components and market performance. Our results show that process innovation, asset specificity, management's attitude, nationality, and availability of substitute components strongly affect the degree of internal sourcing of major components that subsequently has a bearing on a product's market performance.