Knowledge Acquisition and Decision Making Rights in the Interfirm Division of Labor Upon the Core Component Supplier

The Case Study of Smartphone Development

Abstract

This study aims to explore the interfirm product development, which is based on the knowledge provided by core component supplier and carried out by brand firm and contract manufacturer. The quantitative analysis results show that by “using core component supplier's toolkit” and “conducting technology communication with core component supplier,” contract manufacturer can have a positive effect on the decision making rights in the interfirm product development with the brand firm. In such triad interfirm division of labor, this study asserts that the assignments of decision making rights are decided by the extent to which the firm (principle) or partner (agent) can acquire higher degree of knowledge from a third party.