Assessing outsourcing options in developing countries will facilitate the creation of strategies that encourage developed nations to outsource work to developing countries, and to keep developing countries from outsourcing work to developed countries so they retain the knowledge and growth potential embedded in the task.
This research investigates asset specificity in outsourcing decisions, where the term “asset” refers to the products and services being evaluated, and its findings can be leveraged to help developing countries create outsourcing strategies that will support economic development. A principle focus of transaction cost economics is the optimal location for the production of a product. The analytical approach of transaction cost economics is the discriminating alignment of the driving factors for a location decision.
One of the main driving factors in discriminating alignment analysis is asset specificity, which means that products or services are not perfectly standardized so that specialized means of operation are needed to support the differences. Discriminating alignment can be applied to make decisions to outsource certain production to another organization and to accept such outsourcing requests. This paper examines case studies to understand the approach and the importance of asset specificity.
Dr. George Ray