THE MAKE‐BUY DECISION AND MANAGING MARKETS: THE CASE OF MANAGEMENT BUY‐OUTS

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Abstract
This paper attempts to develop the issue of the internalization of transactions (the make‐buy decision). Butler and Carney (1983) have developed the concept of managing markets where under certain conditions transactions will not be internalized. This paper, as well as attempting to complete this picture, also draws attention to a largely ignored aspect of organization theory ‐ the issue of when a transaction which is already internalized will be externalized. In examining the sale of subsidiaries by parent companies an attempt is made to draw the boundaries of Williamson's divisionalized form of organization. The necessary and sufficient conditions for sale to the management are developed in the theoretical discussion, followed in the second section by empirical evidence from a survey of management buy‐outs.

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