Category: Theories,Model & Framework

Theory of Comparative David Ricardo, the nineteenth-century economist from Britain, solved the problem of the theory of absolute advantage, by developing the theory of comparative advantage. Absolute advantage predicts that no international trade would occur if one nation has an absolute advantage over two goods. But this theory shows that trade would still happen as […]

Factor Proportion Theory             This theory further extends the concept of comparative advantage that exists for certain countries and this is explained in detail by the factor proportions theory. This theory hypothesizes that nations would generate materials that use plenty of production factors which are produced in the same country itself. In case of materials […]

Product Life Cycle Theory Naturally, as the international scenario where trading is done evolves on a daily basis, existing trade theories are continuously at a loss in tackling the ever-rising ambiguities put forth by the emerging trade scenarios.  The 1960s was a period of technology explosion in various fields and this directly reflected and influenced […]

Agency Theory The notion of incongruence between the external vendor and a principal could be understood by outsourcers through the agency theory (Jensen & Meckling, 1976). The basic assumption holds irrespective of outsourcing alliances (individuals or organization), and the theory was basically built to understand inter-firm relationship (principal-agent conflict), where in the outsourced IT projects […]

Knowledge based theory     Knowledge based theory in the organization illustrates knowledge plays vital role to design managerial decision making to explain relevant economic behavior (Grant, 1997). While transaction focuses on conducting the outsourcing at lower costs while this theory emphasizes the role of knowledge (Nonaka, 1994). As per this theory, firms can be perceived […]

Transaction Cost Economics Theory The primary rationale of outsourcing is cost reduction (Takac, 1994; Lacity and Willcocks, 1998). The theory focuses on the inter-firm exchanges of costs (economic trade), particularly the direct and indirect expenses of negotiation, monitoring and enforcing implicit and explicit contracts between firms (e.g. production and coordination) (Ang, 1998; Williamson, 1991; Williamson, […]

Absolute Advantage Theory The theory of absolute advantage destroys the mercantilist idea that international trade is a zero-sum game. Unlike mercantilism this theory measures the nation’s wealth by the living standards of its people and not by gold and silver. There is a strong disadvantage with absolute advantage theory. If there exists a nation that […]