How could outsourcing be possible? — An explanation of contract model

Outsourcing production is one of the main existence modes for China's foreign trade enterprises. Only from the perspective of elements theory of comparative advantage is not adequate. Based on the basic principal-agent models and joining asset-specific variables, this paper tries to analyze the effect of technological innovation for organizational change. Conclusion is that, the popularization of IT technology reduced the way of technology-specific types, which reduces the risk and uncertainty of the outsourcing contract, making the outsourcing production possible.