Outsourcing Impact on U S Economy

However, the research paper will prove that such activities have not been beneficial for the U.S. economy. The country is experiencing de-industrialization, where the growth in domestic production has declined. The aggregate employability of individuals residing in the nation has fallen and the extent of income inequality within its job market has increased.&nbsp. &nbsp.The current paper has pointed out that outsourcing in rendering the U.S. economy weaker compared to nations that are conducting the outsourced activities.

Commercial opportunities and threats experienced by the companies in the current era have considerably increased after the enactment of liberal trading policies in each nation. The profit-making business organizations conduct business on the basis of transaction cost economies resource-based view. Under this regime, firms expand in new marketplaces after saturation of the domestic one. However, the companies incur numerous additional costs and problems in the new markets. In order to eradicate costs and risks of internationalization, giant multinational companies often adopt the strategy of outsourcing in trade. This research paper tries to throw light on the impact created by outsourcing on the economy of the United States (U.S.). It is rational to analyze this topic because outsourcing is extensively practiced in the present scenario, which had been initiated in the U.S. After analyzing the impact, the research paper will indirectly emphasize upon advantages and disadvantages of the process of outsourcing (Dornbusch, 2004).
The concept of outsourcing is often explained in terms of transaction cost theory and agency theory.&nbsp.&nbsp.According to the transaction cost theory, outsourcing is practiced by companies for lowering costs in business and gaining core competencies.&nbsp.This concept is linked with the rationality of specialization in the business world.&nbsp.