Outsourcing or restructuring: The dynamic choice

This paper examines the role of outsourcing when a firm attempts to establish its true level of production costs in an uncertain context. Outsourcing may provide additional information to the firm about the efficiency of its organizational structure. The information flow that outsourcing gives to the firm creates a real option by delaying the final decision relating to its definitive organizational mode, so that temporarily outsourcing and then resuming operations may be the optimal management decision for the firm.