Faraway, so close. Division of labour, supplier relationships and industry architectures

Industry architecture is considered as the structure of relations among agents in an industry: by describing the division of labour and interactions among players, it sheds light on the question of how industries evolve and are transformed, identifying who does what, as well as who takes what. The traditional dichotomy market vs hierarchies do not perfectly describe the reality. The decisional process is more complex and, once the productive process is moved outside the firm’s boundaries, firms are called to define also typologies of the relation with the suppliers. Firms are called to define how close to be with its suppliers, how much knowledge, capabilities and sensitive information to share, how strategic will be the relation. The empirical setting of the study is the solutions business model, where we assist to the elimination of the traditional division between service and manufacturing. Relying on an original dataset of 102 firms operating in the IT sector in Europe, our results identify a curvilinear U-shaped relation between the specificity of the assets required by the outsourced activities and the typology of relationship with the supplier. A strong relationship with the supplier (e.g., a joint venture or partnership) can be found in presence of both low and high levels of asset specificity: these results only partially confirm the previous understanding of how firms shapes their offering, shedding further light on the evolution of organizational and industry architecture in evolving context.