Now let us consider how the possibility of motivating the suppliers with relational contracts affects the boundaries of the firm. Imagine that Rivian is a cash-constrained automotive startup. Are they more or less likely to be able to motivate suppliers with relational contracts? Give your answer. Should Rivian do more or less parts manufacturing in house compared to Toyota?
It is possible that Rivian, as a cash-constrained automotive startup, may be less able to motivate suppliers with relational contracts compared to a more established and financially stable firm like Toyota. This is because relational contracts often involve some level of investment in the supplier relationship, such as through the provision of upfront financing or the sharing of information and technology. As a startup, Rivian may not have the resources to make such investments.
In terms of in-house parts manufacturing, it is difficult to make a general comparison between Rivian and Toyota without more information. Factors that could influence the decision to manufacture parts in-house versus outsourcing to suppliers include the availability of specialized equipment or technology, the cost of production, and the availability of skilled labor. It is possible that Rivian may decide to outsource more parts manufacturing to suppliers in order to save on upfront costs, while Toyota, as a larger and more established firm, may have more resources available to invest in in-house production. However, this would depend on the specific circumstances of each company.