This article examines the impact of new product development (NPD) “make/buy” choices on product quality using data from the automobile industry. Although the business press has lamented that NPD outsourcing compromises product quality, there is no systematic evidence to support or refute this assertion. Against this backdrop, this study tests a contingency model of the impact of NPD make/buy decisions on immediate and future product quality. The hypotheses are tested using data on NPD make/buy choices of 173 models of 12 automobile firms in the United States between 2007 and 2014. The authors find that whereas NPD buy has a more positive impact on immediate product quality, NPD make has a more positive impact on future product quality. Furthermore, the immediate product quality impact of NPD buy is stronger when (1) technologies are more complex and (2) firm NPD capability is higher. In contrast, the future product quality impact of NPD make is stronger when (1) there is postlaunch adverse feedback and (2) firm NPD capability is higher. The study highlights the complex trade-offs associated with NPD make/buy decisions and offers valuable insights on how firms could manage these decisions.
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