This article deals with the influence of transaction costs and organizational competences on the choice of governance structure for manufacturing stage in a productive system. The objective is to develop a conceptual model that explains the choice of supplier for manufacturing through transaction costs and organizational competences. Following earlier studies, the model proposes competences of the product´s owner influence the vertical scope in a relation moderated by transaction costs. The constructs in the model are: "governance structure", the dependent variable categorized as internal or external supplier, "transaction costs", measured by asset specificity of the product and bargain power of the firm in the manufacturing stage, and "competences on operations", measured by experience and diversification of the firm. The study presents some methodological implications for applying the model in Brazilian pharmaceutical industry, through searching for secondary data on drugs and firms in a public database of the federal regulatory agency.

The objective of this study is to analyze the choice between internal and external supplier at the manufacturing stage in the Brazilian pharmaceutical industry. We developed a structural equation model with hypotheses on experience, diversification, asset specificity, and vertical integration. We collected data for 1566 drugs registry, including its pharmaceutical form, therapeutic class and operation time of the firm and group. We found that the higher the experience, the lower the vertical integration in the manufacturing stage and a clear mediating effect of experience on the relationship between diversification and vertical integration. As firms advance in experience and the spread of the capabilities throughout the industry, agents concentrate activities on the relevant stages in value creation and strategically outsource the manufacturing. As the firm increases the diversification in the product portfolio, the experience favours the building of capabilities to manage the production lines and strategies for outsourcing. This result suggests a low risk for strategic alliances at the manufacturing stage.

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