Technology make-or-buy decisions in the german industry: Criteria, methods and organization

Abstract

Because of limited resources and inherent risks, companies tend to develop not all technologies by themselves. There are alternatives to internal development i.e. company acquisition or contract development. To have a decision basis for one of these alternatives it is necessary to evaluate those in the context of the company. The decision about internal or external acquisition of technologies is part of the technology strategy which is closely connected to the firm's competitive and market entry strategy. Our study addresses the connection between the technology acquisition decision and the company's technological market entry and competitive strategy. The quantitative explanatory study in the German industry shows that there are some notable differences between companies with cost leadership and differentiation strategy. Differentiators more often used joint research and patent or technology purchasing and involve more often the legal department in the decision process. Pioneers, compared to followers, involve more internal stakeholders in the decision process, e.g. corporate management, R&D and the legal department. Furthermore, they tend to source technology externally more often using joint research approaches.