دانلود رایگان مقاله انگلیسی نامتقارنی شرکت و برون سپاری استراتژیک - نشریه الزویر

ABSTRACT

In contrast to the conventional wisdom, we show that a final goods producer may outsource input production to an outside supplier even if the final goods producer possesses a superior inputproduction technology compared to the outside supplier. Such an outsourcing may reduce consumer surplus and social welfare. We also show that, in the presence of outsourcing, innovation by the firm doing outsourcing to reduce the cost of in-house input production and to reduce the input coefficient in the final goods production may have significantly different implications for the consumers and the society.

4. Conclusion

We provide a new strategic rationale for outsourcing in this paper. We show that although a firm possesses a superior inputproduction technology, it may still have the incentive for outsourcing if it has significantly higher efficiency in processing input to the final good compared to its rival. This effect was hitherto not recognized in the literature. We also show that outsourcing may make the consumers as well as the society worse off by raising the input price charged by the independent input supplier. Thus, it justifies recent concern about the welfare effects of outsourcing.

We further discuss the welfare implications of innovation by the firm doing outsourcing. We show that, in the presence of outsourcing, innovation to reduce the cost of in-house input production and innovation to reduce the input coefficient in the final goods production may have significantly different implications for the consumers and the society.

We have considered in our analysis that firm 1 has a better technology to produce the final goods compared to firm 2. However, there could be another interpretation of our analysis following Arya et al. (2008). 16 Instead of considering firms 1 and 2 having different technologies to produce the final goods, one can consider a model where the independent intermediate input supplier charges Firm 1 a λ fraction of the price charged to Firm 2. Even if firms 1 and 2 have the same production technologies for the final goods, the independent input supplier charges asymmetric input prices in this way to induce outsourcing by firm 1 (i.e., playing “favoritism” in the terminology of Arya et al., 2008), which allows the independent input supplier to earn higher profits compared to the situation where firm 1 does not outsource. The restriction of λ<2 7 shown in Proposition 1 suggests that, under this alternative interpretation, the independent supplier may charge firm 1 an input price that is 2 7 of the input price charged to firm 2. However, this is altogether a separate exercise regarding the optimality of such a discriminatory pricing in the given context.