A conceptual framework for understanding the outsourcing decision

Abstract

Outsourcing is an increasingly important initiative being pursued by corporations in North America and Europe in pursuit of improved efficiency. This paper provides a conceptual framework to assist managers in identifying and implementing outsourcing decisions. In particular, the framework suggests a way for managers to identify the pre- and post-contractual risks associated with outsourcing decisions along with strategies that can be implemented in the pre-contractual stage in order to mitigate those risks. Empirical findings from the `transactions cost' literature are referenced to illustrate elements of our conceptual framework.