HOLLOW FIRM

A firm that outsources all or practically all production operations, typically a network-firm.

"The manufacturing sector in Hong Kong is still dominated by low-technology industries, such as textiles. As both labour and land costs in Hong Kong have increased, locally-based manufacturing activities have been priced out of the market. Instead, a number of Hong Kong concerns have become ‘hollow' firms, which maintain their administrative and development activities in Hong Kong, but have transferred their factories further afield, primarily into adjacent parts of China."
(Macdonald, S., T. Turpin and A. Ancog, Maximizing the Contribution of IP Rights (IPRs) to SME Growth and Competitiveness, Mates Consulting Pty. Ltd., 2005, visited 2009-07-28)

Hollow firms buy material products from subcontractors rather than manufacturing them within the company. This allows the company to reduce the amount of stock in their warehouses at any given time by ordering only the amount of product needed to respond to demand. In this regard, it is a fragmented company.

An example of this is the firm Dell, which is only active at the final stage of production — the assembling of computers — and in customer service.