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Outsourcing, Product Quality, and Contract Enforcement

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  • Yi Lu
  • Travis Ng
  • Zhigang Tao

Abstract

Does outsourcing compromise product quality? Does sound contract enforcement alleviate this concern? We offer a simple model to illustrate how outsourcing leads to lower product quality and how contract enforcement helps mitigate this problem. These theoretical predictions are borne out of a survey of 2,400 firms in China conducted by the World Bank in 2003.

Suggested Citation

  • Yi Lu & Travis Ng & Zhigang Tao, 2012. "Outsourcing, Product Quality, and Contract Enforcement," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 21(1), pages 1-30, March.
    • Handle: RePEc:bla:jemstr:v:21:y:2012:i:1:p:1-30
    DOI: j.1530-9134.2011.00321.x
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Ng, Travis, 2014. "Bailing outsourcing," Journal of Comparative Economics, Elsevier, vol. 42(4), pages 983-993.
    2. Sanxi Li & Xinyu Li & Zhan Qu, 2023. "Does vertical integration increase product quality?," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 11(1), pages 69-80, April.
    3. Verena Nowak & Christian Schwarz & Jens Suedekum, 2012. "On the Organizational Structure of Multinational Firms - Which Sourcing Mode for which Input?," CESifo Working Paper Series 3823, CESifo.
    4. Li, Dong & Nagurney, Anna, 2015. "A general multitiered supply chain network model of quality competition with suppliers," International Journal of Production Economics, Elsevier, vol. 170(PA), pages 336-356.
    5. Robinson, Michael A. & Stuebs, Martin & Wilfong, Lauren & Beard, Haylee, 2020. "The costs to bus go round and round: Charting a route to a decision," Journal of Accounting Education, Elsevier, vol. 50(C).
    6. Ng, Travis, 2013. "Information acquisition and institutions: An organizational perspective," Information Economics and Policy, Elsevier, vol. 25(4), pages 301-311.
    7. Sun, Sizhong & Anwar, Sajid, 2022. "Estimation of product quality in China's food processing and manufacturing industries," Economic Modelling, Elsevier, vol. 107(C).
    8. Tai‐Liang Chen & Zuyi Huang, 2020. "Technology licensing or cost‐reducing outsourcing? Game theoretical analysis on consumers' home bias effects and firms' optimal strategies," Bulletin of Economic Research, Wiley Blackwell, vol. 72(4), pages 417-433, October.
    9. Wadesango N & Gwangwadza D C & Mhaka C & Wadesango V O, 2018. "The Impact of Labour Force Reduction on the Financial Performance of Manufacturing Companies," Journal of Economics and Behavioral Studies, AMH International, vol. 10(2), pages 20-32.
    10. Sajid Anwar & Sizhong Sun, 2023. "Foreign direct investment and product quality in host economies," The World Economy, Wiley Blackwell, vol. 46(5), pages 1290-1318, May.

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