In recent years, the manufacturers’ outsourcing decision-making already became a popular research subject. In general, cost reduction is probably the most often mentioned factor that benefits outsourcing decisions. However, the outsourcing contracts are incomplete, there are extra cost including monitoring cost, the search cost, the managed cost, etc., The optimal outsourcing decision is basically made from the trade off between these positive forces and negative forces. In contrast to the existing literature, this article studies the outsourcing decision in a framework that there are no monitoring cost and management cost, there is no globally cost advantage between upstream firms and downstream firms, and the downstream, outsourcing firms can engage R&D to reduce theirs’ production costs. Basically, this article finds out that although many factors, including cost difference、the decision order between outsourcing price and the R&D decision, the number of outsourcing manufacturers, influence firm’s outsourcing decision, but the market size has the clearest and consistent impact on firm’s outsourcing decision. In particular, the small market supports complete outsourcing, the medium market supports no outsourcing, and the large market supports partial outsourcing.