Cooperation, Transaction cost, Dynamic capability, Information and communications technology industry, Logistic regression,

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PurposeThe purpose of this paper is to shed light on the boundary choices of firms operating in the pulp and paper industry.Design/methodology/approachExplorative interviews were conducted with senior managers of pulp and paper companies, and comparative data on other industries were collected. The theoretical approach was based on extended transaction‐cost economics (TCE).FindingsThe results demonstrate that when company decision makers consider the governance choice for different activities, i.e. make or buy, the determinants implied in traditional TCE are not the only relevant factors. Transaction or management benefits are also important, and managers also take into account the long‐term effects of boundary choices. The determinants of governance choices depend on the nature and strategic importance of the activity in question: when it is a question of outsourcing marginal activities, for example, management costs and dynamic transaction benefits seem to be of most significance. On the other hand, transaction costs and dynamic management benefits have a major role in the definition of boundary choices related to core activities.Research limitations/implicationsThis research paper is explorative. Further quantitative research would enhance the generalizability of the findings.Practical implicationsThis paper demonstrates that the factors managers implicitly take into account when considering firm boundaries could be explicitly assessed through the application of extended transaction‐cost logic. This would help to make the decision making more structured and would highlight the relevant factors affecting these boundaries.Originality/valueTraditional transaction‐cost theory has been criticised for neglecting value‐creation issues that may also be essential in terms of explaining the firm's boundary choices. This study brings not only transaction costs but also the benefits and dynamic aspects of these choices under scrutiny.

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