High-Tech Outsourcing: A benefit-cost Framework

Is international outsourcing “efficient” or merely a redistribution of resources from one economic sector to another? This paper looks at this question from the perspectives of: (1) economic theory, which abstracts away from institutions and towards generalized incentives; (2) management theory, which focuses more on institutional issues that economic theory tends to ignore; and (3) a combined perspective within a benefit-cost analysis framework. The paper argues that an evaluation of outsourcing's impacts requires determining how the practice affects overall size of economic output and equity across sectors and countries. A benefit-cost template is developed for considering these questions more systematically