The Performance Impact Of Core Component Outsourcing: Insights From The LCD TV Industry
By Madhu Viswanathan, Prokriti Mukherji, Om Narasimhan, Rajesh Chandy
Journal of Marketing Research | August 2021
DOI
doi.org/10.1177/00222437211010766
Citation
Viswanathan, Madhu., Prokriti Mukherji., Om Narasimhan., Rajesh Chandy. (2021). The Performance Impact Of Core Component Outsourcing: Insights From The LCD TV Industry Journal of Marketing Research doi.org/10.1177/00222437211010766.
Copyright
Journal of Marketing Research, 2021
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Abstract
Firms in technology markets often outsource the manufacture of core components – components that are central to product performance and comprise a substantial portion of product costs. Despite the strategic importance of core component outsourcing, there is little empirical evidence (and many conflicting opinions) about its impact on consumer demand.We address this gap with an examination of panel data from the flat panel television industry,across key regions globally. Results from our estimation indicate that core component outsourcing reduces the firm’s ability to be on the technological frontier; this hurts demand, because our estimates suggest that consumers care about firms being on the frontier. On the other hand, such outsourcing also reduces costs. Finally, we find that outsourcing increases the intensity of competition in the marketplace. We assess these (often opposing) effects, and conduct thought experiments to quantify the performance impact of core component outsourcing.

Madhu Viswanathan is an Associate Professor of Marketing at the Indian School of Business (ISB). Prior to joining ISB, he served as an Assistant Professor at University of Arizona.

Professor Viswanathan’s research work focuses on the role of distribution channels, B2B relationships, and salesforce compensation, as well as, their impact on key marketing mix elements such as pricing and product assortment. His work has been published in the Journal of Marketing Research, a premier journal in the field of marketing. He has consulted for and worked with companies spanning a wide range of industries including retail, insurance, and healthcare.

Professor Viswanathan holds a PhD in Business Administration (Marketing) from the University of Minnesota, Twin Cities, and an undergraduate degree in Mechanical Engineering from BITS, Pilani.

Madhu Viswanathan
Madhu Viswanathan