The role of clockspeed in outsourcing decisions for new technologies: Insights from the prisoner's dilemma

Some research in the area of make–buy decisions for new technologies suggests that it is a good idea for a company to pursue a fairly rigorous “make” policy in the early days of a potentially disruptive innovation. Other studies prescribe exactly the opposite, promoting instead a “buy” strategy. Drawing from observations and lessons from the Prisoner's Dilemma, this paper seeks to bridge the gap between these perspectives by suggesting that both strategies are valid, but that they are most successfully applied in different market environments. The “make” prescription may be more suited to either extremely fast or extremely slow rates of technological change, while a “buy” strategy might be more appropriate in market sectors where technologies evolve at a medium pace. This paper highlights the importance of industry clockspeed and supplier relationships in make–buy decisions for new technologies, and puts forward two new hypotheses that require empirical testing.