Article first published online: 3 NOV 2011
Copyright © 2011 John Wiley & Sons, Ltd.
Managerial and Decision Economics
Volume 33, Issue 1, pages 47–59, January 2012
How to Cite
Moretto, M. and Rossini, G. (2012), Flexible Outsourcing. Manage. Decis. Econ., 33: 47–59. doi: 10.1002/mde.1560
- Issue published online: 6 DEC 2011
- Article first published online: 3 NOV 2011
- vertical integration;
- flexible outsourcing;
- entry, size
Flexibility is definitely a key for success and is crucial in vertical relationships. Then, it seems worth analyzing the selection of the optimal degree of vertical integration and/or separation in a dynamic uncertain environment, where a flexible firm can switch from a certain degree of outsourcing back to vertical integration. The enterprise we investigate never throws away the vertical control of the manufacturing chain as it does not outsource the entire input requirement. On the contrary, it keeps the ability to make the intermediate good in-house as a kind of prudential conduct. Higher uncertainty lets firms enter earlier, as vertical flexibility provides a hedge against risk. After entry, an increase in uncertainty boosts the probability of outsourcing. These results differ from received literature. Copyright © 2011 John Wiley & Sons, Ltd.