One of the reasons for international outsourcing by firms located in advanced economies is that labor is cheaper in less developed countries. When firm outsources its production, it must balance the marginal gain (cost saving) of outsourcing with the marginal cost of doing so (lowering rivals' cost). But for firm who didn't receive outsourcing contract will provide incentive scheme to its manager who is responsible for production decision in order to compete in the product market. This paper reaches the following conclusion: in order to compete with the outsourcing firm, the rival firm will take delegation and choose a more aggressive manager to compete. Managerial strategic-adoption will result in an increase in the employment level of firm 2, an increase in the home employment level of firm 1, and a fall in the outsourcing of firm 1.