Much of the description in the previous chapter focused on the structure of outsourcing and, perhaps more correctly, on the vertical structure of firms. The negative curvilinear explanation relates that vertical structure to a firm's performance levels. Hence the previous chapter, as well as the literature discussion in chapter 2, did much to cover design and performance but little to help understand the outsourcing process. In this chapter I try to provide more detail of the decision-making processes that lead to changes in outsourcing levels, what was defined as the outsourcing process in chapter 1, as well as the timing and magnitude of these outsourcing processes. In doing so, I will draw much more heavily on social sciences other than economics, especially the organization theory and strategic management versions of history, sociology, psychology, and political science. Three core concepts that are used in the process are misalignment, inertia, and bandwagoning. In all, this chapter helps us to understand how outsourcing is driven not just by a set of structural determinants that are optimally processed by some anonymous brain but also by a variety of social processes. It begins by answering the question of why firms would locate anywhere other than at point A, for instance at point B, in figure 3.1.

The meaning of misalignment

Alignment and misalignment have been the subject of study in a variety of settings.