Document Type
Article
Publication Title
Brigham Young University Law Review
Publication Date
2011
Page Number
263
Keywords
modularity, outsourcing, contracting out
Disciplines
Business Organizations Law | Contracts | Law
Abstract
Firms have increasingly moved productive activities from within to outside the firm through outsourcing arrangements. According to some estimates, the value of outsourcing contracts has been nearly 100 billion dollars per year since 2004. Firm outsourcing happens for a number of reasons, including to save labor costs, capture the benefits of regulatory arbitrage, and take advantage of economies of scale in the provision of firm needs. We review a number of outsourcing contracts for evidence that contract techniques are used to help modularize the relationship between the firm and its service provider. Consistent with what modularity theory might predict, some contract terms seem to work to thin the interactions between the firm and its service provider, and this thinning serves to make contracting for otherwise intrafirm services more feasible. Other contract terms serve to help the parties manage the fact that inevitably their relationship will be thick with interactions
Recommended Citation
Margaret M. Blair, Erin O'Hara O'Connor, and Gregg Kirchhoefer,
Outsourcing Modularity, and the Theory of the Firm, 2011 Brigham Young University Law Review. 263
(2011)
Available at: https://scholarship.law.vanderbilt.edu/faculty-publications/29