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Outsourcing or restructuring: The dynamic choice

Listed author(s):
  • Antelo, Manel
  • Bru, Lluis

This paper examines the role of outsourcing when a firm attempts to establish its true level of production costs in an uncertain context. Outsourcing may provide additional information to the firm about the efficiency of its organizational structure. The information flow that outsourcing gives to the firm creates a real option by delaying the final decision relating to its definitive organizational mode, so that temporarily outsourcing and then resuming operations may be the optimal management decision for the firm.

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File URL: http://www.sciencedirect.com/science/article/pii/S0925-5273(09)00243-6
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Article provided by Elsevier in its journal International Journal of Production Economics.

Volume (Year): 123 (2010)
Issue (Month): 1 (January)
Pages: 1-7

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Handle: RePEc:eee:proeco:v:123:y:2010:i:1:p:1-7
Contact details of provider: Web page: http://www.elsevier.com/locate/ijpe

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  1. Brown, Clair & Linden, Greg, 2005. "Offshoring in the Semiconductor Industry: Historical Perspectives," Institute for Research on Labor and Employment, Working Paper Series qt0wv0k78t, Institute of Industrial Relations, UC Berkeley.
  2. Bengtsson, Jens, 2001. "Manufacturing flexibility and real options: A review," International Journal of Production Economics, Elsevier, vol. 74(1-3), pages 213-224, December.
  3. Bacchetta, Philippe & Dellas, Harris, 1997. "Firm Restructuring and the Optimal Speed of Trade Reform," Oxford Economic Papers, Oxford University Press, vol. 49(2), pages 291-306, April.
  4. Alvarez, Luis H.R. & Stenbacka, Rune, 2007. "Partial outsourcing: A real options perspective," International Journal of Industrial Organization, Elsevier, vol. 25(1), pages 91-102, February.
  5. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, December.
  6. Gene M. Grossman & Elhanan Helpman, 2005. "Outsourcing in a Global Economy," Review of Economic Studies, Oxford University Press, vol. 72(1), pages 135-159.
  7. Duncan Simester & Marc Knez, 2002. "Direct and Indirect Bargaining Costs and the Scope of the Firm," The Journal of Business, University of Chicago Press, vol. 75(2), pages 283-304, April.
  8. Kylaheiko, K. & Sandstrom, J. & Virkkunen, V., 2002. "Dynamic capability view in terms of real options," International Journal of Production Economics, Elsevier, vol. 80(1), pages 65-83, November.
  9. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
  10. Bardhan, Ashok Deo & Kroll, Cynthia, 2003. "The New Wave of Outsourcing," Fisher Center for Real Estate & Urban Economics, Research Reports qt02f8z392, Fisher Center for Real Estate & Urban Economics, UC Berkeley.
  11. Grubbstrom, Robert W. & Olhager, Jan, 1997. "Productivity and flexibility: Fundamental relations between two major properties and performance measures of the production system," International Journal of Production Economics, Elsevier, vol. 52(1-2), pages 73-82, October.
  12. Wang, Li Ming & Liu, Li Wen & Wang, Yong Jie, 2007. "Capacity decisions and supply price games under flexibility of backward integration," International Journal of Production Economics, Elsevier, vol. 110(1-2), pages 85-96, October.
  13. Triantis, Alexander J & Hodder, James E, 1990. " Valuing Flexibility as a Complex Option," Journal of Finance, American Finance Association, vol. 45(2), pages 549-565, June.
  14. Gene M. Grossman & Elhanan Helpman, 2002. "Integration versus Outsourcing in Industry Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 85-120.
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