Outsourcing: A Case of Shared Mental Models in Conflict

For more than two decades, outsourcing – the business practice of transferring jobs, knowledge, and technologies from high‐ to low‐cost countries – has been a leading public policy issue in the U.S. and other economies. Policymakers respond to public concerns over outsourcing in two ways. One, they craft an electoral message to attract voters, and two, they choose policy responses. Two competing ideologies have emerged, one shared by elites and the other the public, to describe outsourcing and formulate policy solutions. This paper applies the Shared Mental Models (SMM) framework developed by Denzau and North to the two ideologies and it describes how each ideology shapes the politics and policies of outsourcing. Outsourcing is the kind of difficult collective choice – highly complex with strong uncertainty, limited information feedback, and mixed motivations ‐ well suited for the SMM framework. The framework provides a novel view into the political and policy dynamics of outsourcing.