Abstract
Based on a case study of a Portuguese packaging firm, this paper examines how vertical integration of the supplier serves as a vehicle for the full outsourcing of the client firms'needs in a solution that reduces transaction costs, favors specialization, and permits small and medium‐sized firms to develop competencies that may be exploited in a wide array of projects. Vertical integration by the supplier (a governance decision) is a strategic response to changes in the sourcing model of the clients. Client‐supplier relationships have inter‐spatial and inter‐temporal value that surpasses spot market exchanges.
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