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.