The focus of this paper is outsourcing activities, where the contracting worker is
formally self-employed but the conditions of work are similar to those of employees.
It is argued that the outsourced workers are dependent on or integrated into the
firm for which they work. We investigate the mechanisms by which firms mix governance
structures and give evidence of how these 'hierarchical' forms of outsourcing create
dependency. The key argument of this paper is that firms have established governance
structures based on markets, hierarchies and self-enforcing relational contracts
so that they are able to keep a substantial amount of control despite sourcing out
of labour. Furthermore, we argue that such hierarchical forms of outsourcing produce
dependency. Using empirical evidence of the Austrian insurance industry, it is demonstrated
that dependency is created, firstly, by the contractual restriction of alternative
uses of resources, secondly, by support measures that bind the worker closely to
the outsourcing firm, thirdly, by relationship-specific investments made by the worker
and, fourthly, by authority elements.