Outsourcing, Product Quality and Contract Enforcement

24 Pages Posted: 30 Oct 2009

See all articles by Yi Lu

Yi Lu

School of Business, University of Hong Kong

Travis Ng

The Chinese University of Hong Kong (CUHK) - Department of Economics

Zhigang Tao

The University of Hong Kong - School of Business

Date Written: August 1, 2009

Abstract

Does outsourcing compromise product quality? Does sound contract enforcement alleviate this concern? Using data from a survey of firms in China conducted by the World Bank, we confirm that outsourcing does compromise product quality, but the negative impact of outsourcing on product quality is mitigated by the effectiveness of contract enforcement. We offer a simple model to illustrate how outsourcing leads to lower product quality and how contract enforcement helps alleviate this problem.

Keywords: Outsourcing, Product Quality, Contract Enforcement

JEL Classification: D23, L23, L15, K

Suggested Citation

Lu, Yi and Ng, Travis and Tao, Zhigang, Outsourcing, Product Quality and Contract Enforcement (August 1, 2009). Available at SSRN: https://ssrn.com/abstract=1495666 or http://dx.doi.org/10.2139/ssrn.1495666

Yi Lu (Contact Author)

School of Business, University of Hong Kong ( email )

Rm 730, Meng Wah Complex
Pokfulam Road
Hong Kong
Hong Kong
(852) 2241-5245 (Phone)
(852) 2858-5614 (Fax)

HOME PAGE: http://www.fbe.hku.hk/~luyi

Travis Ng

The Chinese University of Hong Kong (CUHK) - Department of Economics ( email )

Shatin, N.T.
Hong Kong

Zhigang Tao

The University of Hong Kong - School of Business ( email )

Meng Wah Complex
Pokfulam Road
Hong Kong
China
(852) 2857-8223 (Phone)
(852) 2858-5614 (Fax)

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