This paper investigates the role of productivity on a firm's organizational choice. We expand Antràs and Helpman (2004) by allowing heterogeneous firms to choose between adopting specific and generic inputs. In input-intensive industries, firms face a trade-off between the lower productivity of generic inputs and the reduced hold-up friction of generic outsourcing. We demonstrate that the hold-up friction under generic outsourcing increases with a firm's productivity. This implies that: (i) high productivity firms choose ideal outsourcing to the South, (ii) medium productivity firms choose generic outsourcing to the South, (iii) low productivity firms choose generic outsourcing to the North.