This paper builds on recent research in plural sourcing by identifying two determinants of how firms strike an optimal make-buy balance: resource co-specialization and supplier portfolio-selection. We contribute new insights on firm boundaries by fully exploring the implications of a recent move towards synthesizing the capabilities and transaction cost logics for plural sourcing.

Analyses of in-house lawyers at, and law firms doing work for, Fortune 500 firms provide evidence that firms tilt the balance in favour of ‘make’ whenever opportunities for resource co-specialization exist, and in favour of ‘buy’ when they can reduce contracting costs by selecting a concentrated portfolio of suppliers with broad capabilities.