Managers have exactly two choices when determining the boundaries of the firm: produce goods and services in-house ("make") or purchase them externally ("buy").

Question

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The "make" and "buy" choices anchor each end of a continuum from markets to firms. Several alternative hybrid arrangements are available between these two extremes. Moving from transacting in the market ("buy") to full integration ("make"), alternatives include short-term contracts as well as various forms of strategic alliances (long-term contracts, equity alliances, and joint ventures) and parent-subsidiary relationships.

Managers Have Exactly Two Choices When Determining the Boundaries of the Firm