The fundamental choice among governance mechanism is whether to externally organizetransactions outside the boundary of the firm in the market, or whether to internally organizetransactions within the firm's boundaries. In other words, major decision which is made on thefirm's organizational strategy culminates in the make-or-buy decisions. In business and especiallyin the context of logistics, the worldwide usage and importance of outsourcing has growndramatically over the last decades and researchers have reported on the outsourcing of logisticsfunctions from several perspectives and a growing interest towards outsourcing is indicated by thevolume of writings on the subject in scholarly journals, trade publications and popular magazines.

The theoretical framework in outsourcing studies has commonly been the theory of the firm inmicroeconomics, transaction cost theory, agency theory, marketing or strategic management.However, according to recent studies it seems that several perspectives are needed when studyingthe development of relationships and the antecedents that underlie outsourcing decisions. Hence,in this study, concepts will be used from several theoretical backgrounds to get an eclectic viewof outsourcing. The main research question is to study how the buyers' logistics outsourcingdecisions contribute to the accomplishment of goals in business networks.

Empirical part of thesis contains two data sets. First data were collected in November 2005 andthe target group in this data was northern Finnish companies. Totally 161 acceptable responseswere received, corresponding to a 27.4 percent response rate. The second data were collected fromindustrial companies in Finland during spring 2008. In the second data, 235 acceptable responseswere returned, representing a response rate of 22.5 percent.

As a result, a two dimensional model was created for describing outsourcing relationships inthe logistics service markets. On the one hand, network economies can be gained throughhorizontal mode of outsourcing, where focus is in unit costs of services and the way to achievelowest possible unit costs are short-term bidding games among service providers. On the otherhand, network economies can be achieved through vertical mode of outsourcing with cooperationand strategic partnership where all participants concentrate on their core competences and thuscreate network economies through transactional value in long-term. In the middle are hybridmodes of outsourcing where focus is on both unit costs of services and transaction costs. Theseoutsourcing modes are where the outsourcing strategies arise and in this way, the thesis contributesto theoretical development of outsourcing phenomenon and concepts behind logistics outsourcingdecision making.