The field studies by Eccles [1985] and others suggest that issues of “sourcing
policy” arise when an intermediate product or service can either be
supplied by the internal upstream division or by a limited number of outside
suppliers. With imperfect competition for the intermediate product,
the immediate question becomes whether the internal buyer should be free
to source the product externally and whether internal transfers should be
valued at the external price quotes. While such policies are in use at some
companies, others insist on “mandated internal transfers” despite the presence
of potential external suppliers.32