Strategic Perils of Outsourcing : Sourcing Strategy and Product Positioning

Pan, Cong; Matsushima, Noriaki

Institute of Social and Economic Research Discussion Papers, 2016, 983, 1-23

Number of Access:342（2025-07-24 04:31 Counts）

Identifier to cite or link to this item: https://hdl.handle.net/11094/57913

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Title
Strategic Perils of Outsourcing : Sourcing Strategy and Product Positioning
Creator
NRID
1000030807425 1000030807425
CreatorName
Pan, Cong
NRID
1000080334879 1000080334879
ORCID
0000-0002-7865-3875 0000-0002-7865-3875
researchmap permalink
read0116301 read0116301
Scopus Author ID
7005645778 7005645778
CreatorName
Matsushima, Noriaki
Subject
Outsourcing
Product differentiation
Suppliers
Hotelling model
Abstract
Although outsourcing input production has long been considered as an important approach to help downstream manufacturers enhance structural efficiency, we provide a theoretical explanation for why outsourcing may negatively affect downstream firms’profitability.We consider a duopoly model wherein downstream manufacturers endogenously determine their input sourcing and product positioning strategies. We show that when inputs from outside suppliers are not perfectly compatible with downstream manufacturers’requests, outsourcing causes downstream manufacturers to pursue aggressive product positioning behavior, leading to the prisoner’s dilemma—even though both downstream manufacturers could be better off producing inputs in-house, they may still choose outsourcing.
Publisher
The Institute of Social and Economic Research, Osaka University
Source Title
Institute of Social and Economic Research Discussion Papers
Volume (Issue)
983
Page
1-23
Date of Issued
2016-10-25
Language
English
Handle URL
https://hdl.handle.net/11094/57913
Relation.references
URI
https://www.iser.osaka-u.ac.jp/static/resources/docs/dp/2016/DP0983.pdf
Access Rights
metadata only access
Category
ディスカッション／ワーキング・ペーパー DP/WP
Institute of Social and Economic Research Discussion Papers