| This paper proposes empirical evidence regarding mode of governance and five dimensions of transaction costs, discussing transaction cost economics in relation to the concept of outsourcing offshore and building hypotheses for testing. Starting with Coase (1937), academics have developed theory which proposes that there are costs involved in organizing and managing transactions, both firm- and market-based. As firms vertically integrate or disaggregate in order to improve performance measured by profits, outsourcing has become more common as a way to take advantage of improved margins available in the market rather than in the traditional hierarchy. Outsourcing has quickly evolved to include resource-seeking sources, not only domestically but also internationally, as international market solutions have become a more available method of outsourcing, a practice that is now termed offshoring. This paper provides a literature review of TCE and discusses the history of and developments in offshoring. |
