On the role of sunk costs and asset specificity in outsourcing decisions: a research note

Article Abstract:

A study was conducted to address the dearth of papers examining the transaction costs involved in outsourcing decisions. In addition, this research considered the inherent sunk cost related to outsourcing decisions. The aim of this paper was to determine the role of sunk costs and asset specificity in outsourcing. Data were collected from a sample of 103 managers of Belgian hospitals who were presented with a scenario that required them to decide on the outsourcing of patient catering. Findings revealed that the managers were very sensitive to the asset specificity linked to the 'buy' option in an outsourcing decision. Nevertheless, they were also found to be inappropriately sensitive to the sunk costs involved in actual outsourcing decisions, and may under-engage in outsourcing. Earlier commitment to internal purchasing undermined their tendency to outsource.

Analysis, Outsourcing, Assets (Accounting), Cost accounting

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On the use of regression and verbal protocol analysis in modeling analysts' behavior in an unstructured task environment: a methodological note

Article Abstract:

The decision behavior of experienced financial analysts in the analysis of initial public offerings (IPOs) is modeled using regression and verbal protocol techniques. The study extends the work of Anderson (1988) on the application of verbal protocol analysis (VPA) of financial analysts' examination of an IPO prospectus by focusing on decision models and methodologies. VPA and linear regression were used for modeling the decision making process of veteran financial experts asked to undertake an unstructured valuation task. The findings suggest that the two techniques are complementary, but that they have considerable differences when it comes to face validity and variances accounted for in the task environment.

Methods, Decision-making, Models, Decision making, Usage, Financial analysis, Regression analysis, Linear models (Statistics)

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