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Outsourcing, Intellectual Property Rights and Corporate Hollowing Concerns

ABSTRACT As lower priced competition continues to grow in the global arena, firms are increasingly turning to outsourcing, both in the manufacturing and service sectors. This article explores the long-term costs which may occur as a result of outsourcing: a firm's loss of control of its intellectual property, and even more debilitating, the loss or dilution of the core competencies which made the firm a success. Outsourcing of numerous key functions can actually lead to a “hollowing” of the corporation, which is a difficult phenomenon to reverse. Additionally, this article takes a look at how intellectual property protection is becoming a competitive advantage for those countries trying to attract outsourcing contracts. Finally, the authors suggest ideas for future research.