Supply Chain Sourcing in Remanufacturing Operations: An Empirical Investigation of Remake Versus Buy

ABSTRACT Despite recent attention to closed‐loop supply chains and remanufacturing, there is scant information about what drives the re‐make versus buy decision for original equipment manufacturers (OEMs) engaging in remanufacturing. Based on the extant remanufacturing literature and transaction cost economics, we formulated hypotheses related to the drivers of in‐house versus contracted remanufacturing operations. The hypotheses were investigated via quantitative and qualitative data, thus offering a rich test of the formulated relationships. Consistent with the theory, the quantitative results showed that intellectual property, operational assets, and remanufacturing frequency are significant drivers of the re‐make versus buy decision. However, counter to the theory, the quantitative results did not support the significance of brand reputation, technological uncertainty, condition uncertainty, product complexity, and volume uncertainty. The qualitative results were used to enrich these findings by providing theoretical extensions and pragmatic insights of the remake versus buy decision in remanufacturing.