Which of the following statements is true of outsourcing?
A) It involves significantly low amounts of transaction costs.
B) It is the most viable option for companies seeking to avoid becoming hollow.
C) It is the best way for a company to develop in-house manufacturing capabilities.
D) It carries a risk of proprietary technology being expropriated by the contract manufacturer.

Question

Quizplus · Accepted Answer

Outsourcing involves sharing proprietary information and technology with a third-party contractor, which increases the risk of intellectual property theft. This risk can be significant, especially when outsourcing to offshore manufacturers, and companies should take appropriate measures to protect their intellectual property. The other statements are not true; outsourcing often involves significant transaction costs, hollowing out can be avoided through other means, and outsourcing is not the best way to develop in-house manufacturing capabilities.

Which of the Following Statements Is True of Outsourcing