ABSTRACT
Multinational companies are continually seeking innovative methods to compete globally. In the 1980s, top managements were judged on their ability to restructure the corporation and, in the 1990s, on their ability to identify, cultivate and exploit the core competencies (Prahalad and Hamel, 1990). In the 2000s, managers are expected to deal with changes in the times and uncertainties surrounding their companies. To improve efficiency companies seek innovative strategies. One innovative strategy that was exploited in the 1990s was outsourcing. In this chapter transaction cost theory (Coase, 1937; Williamson, 1975), agency theory (Jensen and Meckling, 1976), and signalling theory (Ross, 1973) are used to understand the economic and behavioural aspects of outsourcing and the implications of outsourcing for accounting practices.
