I'd say a mixture of both.
http://www.ncbi.nlm.nih.gov/pubmed/9284093
Balding follicles had around 80% more DHT than non-balding follicles.
So even though they are transplanted to the vertex or frontal part, they continue to produce less DHT than native follicles ? On the other hand, hair from balding scalp regions also continue to produce same level of DHT inside DP after transplantation to arm, or back of the head. In other words hair characteristics(both the level of follicular DHT produced inside it and sensitivity ) remain the same, they are invariant of recipient location. This is why Orentreich’s experiments showed when balding hair transplanted to the arm continued to bald , because hair characteristics inside follicles haven't changed, and these hair continue to produce same level of DHT inside it.
Would donor hair gradually start to thin out if exposed to extra follicular DHT ? Do you think that young bald guys with aggressive male pattern baldness might have more sensitive donor hair than non-balding guys ?