When Should Organizations Outsource Problem-Solving? Balancing Functional and Technical Requirement Specifications in Public Procurement.
Doctoral thesis
Published version
Date
2024Metadata
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- Series of Dissertations [101]
Abstract
Interorganizational interactions between firms are often centered around problem-solving efforts. The ability to efficiently solve problems can facilitate organizations’ value creation, strategic gains, and cost savings, and help them achieve a secure and lasting competitive position. While a few studies have employed a governance view on the organization of the problem-solving process, limited attention (if any) has been given to the organization of problem formulation and problem-solving. This dissertation addresses this gap by empirically examining the question of when firms should outsource the search for solutions to problems to the market and when they should insource and integrate problem-solving with their problem formulation. This choice involves intricate decision-making and poses challenges such as knowledge hoarding, the manipulation of search processes, and other potential obstacles to value creation and capture. In the procurement domain, this decision is most crucial when organizations determine how to formulate requirement specifications, which describe what a buyer intends to procure from a supplier. The present research shows that requirement specifications are a fundamental aspect of the problem-solving process, shaping how organizations govern the relationship between buyers and suppliers. The focus of this dissertation is thus the role of different types of requirement specifications in the public sector procurement setting. Due to strict regulations and formal procedures, decision-makers in public procurement are often obliged to select the type of requirement specifications to be used at the beginning of the problem-solving process, making this decision more common and salient in this context than in the private sector. Decisions regarding how to formulate requirement specifications have extensive implications, influencing innovation, information sharing, and knowledge creation. To better understand this decision, I apply the problem-solving perspective developed within the strategy domain and new institutional economics more broadly. The dissertation seeks to answer the following questions: (1) What are the different ways of specifying requirements that managers use, how can they be defined, conceptualized, and differentiated? and (2) when do organizations choose to outsource or integrate problem-solving using different types of requirement specifications? In addressing these questions, the dissertation employs a multimethod approach, encompassing both qualitative and quantitative studies. Based on a theory-in-use approach (Zeithaml et al., 2020) and the longitudinal process thinking approach (Langley, 1999), the research begins by defining the two distinct types of requirement specifications – technical and functional. By utilizing the inductive approach and analyzing 21 in-depth interviews with procurement practitioners, the second study identifies a set of antecedents related to the choice of technical and functional requirement specifications and provides insights into the selection of requirement specifications as a governance structure. Finally, by using survey data on 258 public procurement projects, the third study empirically examines the role of problem complexity in the choice of requirement specifications. By examining real-world procurement cases and conducting a quantitative study, this dissertation provides insights into when problem formulation and problem-solving are integrated and when they are not based on the way procurers specify requirements, and thereby contributes to the problem-solving perspective (Nickerson & Zenger, 2004; Macher 2006). The research also contributes to the existing business-to-government (B2G) literature by shedding light on what variables motivate procurers to opt for functional requirement specifications instead of technical ones and what mechanisms can hinder this relationship. The present research reveals how public buyers strategically navigate decision-making challenges while aiming to create and capture value.