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| Author: | Chalos, P. Sung, J. |
| Title: | Outsourcing decisions and managerial incentives |
| Journal: | Decision Sciences
1998 : FALL, VOL. 29:4, p. 901-920 |
| Index terms: | DECISION MAKING INCENTIVES MANAGEMENT |
| Language: | eng |
| Abstract: | An agency model is presented in which outsourcing strictly dominates in-house production. The authors argue that firms outsource in order to improve managerial incentives. Conditions are established under which the firm is strictly better off with outsourcing. The benefit of outsourcing is, however, constrained by the trade-off between the incremental coordination costs of outsourcing and the improved incentive structure. The optimal contract is also shown to be a function of whether or not the firm is publicly held. |
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