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Human resource outsourcing: Market and operating performance effects of administrative HR functions

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Abstract

Using event study methodology and two-stage regression analysis on a sample of firms announcing human resource outsourcing (HRO) contracts, this study tests the association between administrative HRO and firm-level capital market and long run operating performance, with archival financial data controlling for endogeneity and outsourcing decision optimality. The results demonstrate that the equity capital market responds positively to client firms announcing administrative HRO, particularly service firms and those outsourcing transactional HR tasks. Additional statistical analysis shows that suboptimal outsourcing is negatively associated with long run operating performance measured as return on assets and operating return on assets. This study contributes to outsourcing literature by more precisely quantifying outsourcing performance through archival financial data and employing capital market empirical tests. Further, it controls for outsourcing decision optimality in examining long run operating performance effects. This research focuses on HR, a critical function within the firm and value enhancing to the firm.

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... Some studies emphasize the beneficial effects of outsourcing on organizational performance and HRM professionals' status (Greer, Youngblood, & Gray, 1999; Klaas, McClendon, & Gainey, 2006; Kulik & Perry, 2008). In contrast, other scholarly work highlights the financial and emotional threats of suboptimal outsourcing decisions in HRM (Butler & Callahan, 2014; Conklin, 2005; Cooke, 2006). First, a large stream of research has pointed out the advantages of outsourcing (administrative) HRM processes, such as more time for internal HRM staff to focus on strategic tasks, less cost-intensive handling of administrative HRM tasks and an overall improvement of organizational performance (Adler, 2003; Butler & Callahan, 2014; Kulik & Perry, 2008). ...
... In contrast, other scholarly work highlights the financial and emotional threats of suboptimal outsourcing decisions in HRM (Butler & Callahan, 2014; Conklin, 2005; Cooke, 2006). First, a large stream of research has pointed out the advantages of outsourcing (administrative) HRM processes, such as more time for internal HRM staff to focus on strategic tasks, less cost-intensive handling of administrative HRM tasks and an overall improvement of organizational performance (Adler, 2003; Butler & Callahan, 2014; Kulik & Perry, 2008). Providing a differentiated picture, Reichel and Lazarova (2013) find in their study of 2,688 companies from 17 European companies that the strategic position of HR departments is positively influenced by outsourcing noncore HRM practices (e.g., payroll, pensions, and benefits) to external providers, but negatively affected by devolvement of HRM responsibilities to line managers. ...
... Butler and Callahan (2014) build on archival financial data to show that announcing an outsourcing decision for administrative HRM tasks generates positive capital market reactions. However, three years after the outsourcing decision a negative influence on operating performance becomes evident if the outsourcing decision is not optimal (Butler & Callahan, 2014). This effect may be explained by a reduction of the quality of delivered HRM services (Cooke, Shen, & McBride, 2005). ...
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A large number of organizations restructured their Human Resource Management (HRM) departments according to their interpretation of Ulrich’s (1997) business partner model into strategic business partners, centers of expertise and shared service centers. I argue that this approach could gain widespread acceptance in organizational practice because of its functionality in addressing tensions inherent in HRM. I relate to paradox research and categorize contradictory HRM demands into tensions of (1) identity, (2) learning, (3) performing and (4) organizing. The implementation of the business partner model resolves these tensions in the short-term by addressing the opposing forces separately. Yet, these resolution strategies are not sustainable and threaten the long-term impact of HRM. I discuss the shortcomings of the business partner model and explore how organizational actors can reframe HRM work to embrace the multifaceted nature of HRM.
... ore complex roles at a future date. All these roles are equally important in the human resource management as this is the pillar of organizational success (Certo, 2018). Private sector receives minimal support from the government, and therefore they must act smart to realize the organizational goals and maximize the efficient use of every resource (Butler, & Callahan. 2014 ...
... ). High impacts human capital can only be realized by the organization continue to invest in their human resource through effective outsourcing strategies. The advantages that come with outsourcing are the main factors that help in the efficiency of human resource management and especially in the private sector(Butler, & Callahan. 2014). Which are the solutions to mitigating the challenges of outsourcing? ...
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The purpose of the study is to identify human resource functions in the Middle East is more dependent on outsourcing. Outsourcing for the recruitment, training and organizational development is believed to make things more efficient at work. Human resources effectiveness after outsourcing is rated to be way higher than when the expertise is sourced within the organization. The first phase of the projects is literature review which involves finding information on the basics of outsourcing and outsourcing activities like cost analysis and training of employees. Information is also collected from previous studies to help in the collection of updated information on outsourcing. The second phase of the study is the qualitative analysis that will allow measurement of the key impacts of human resource outsourcing on the organizational progress. Also, questionnaires will be distributed randomly to employees. The third phase of the study is sampling which involves an analysis of performance evaluation that enterprises display after outsourcing activity. From the research findings, outsourcing would aid in the effective operation of firms in the Middle East. Employees claim to deliver after efficiently outsourcing. Also, Outsourcing functions are useful in finding the best talents and skills to handle complex roles. Lastly, the research offers discussions of the findings of the study; outsourcing is the best HR approach in the Middle East since most of the companies are privately owned, and the main target is cost reduction. The main recommendation is that companies in the Middle East should adopt outsourcing for the main reason of cost reduction.
... SMEs cannot be competitive, innovative and creative without the skilled employees. On top of that, SMEs also experience lack of technological capability in which they do not have sufficient financing to acquire technology that may be actually be very pertinent for them to be competitive and have a strong market position (Butler & Callahan, 2014). It can be surmised from past researchers that the main obstacles surround SMEs are lack of financial and technical resources, insufficient relevant market information and government support and inability to deal with international affairs to execute the business successfully. ...
... Outsourcing has long been regarded as the functions that can be more efficiently performed outside (Unal & Donthu, 2014), and thus generally, can be defined as a situation where a company purchases a value creating activity from external vendors which was or could have been done in-house (Gilley & Rasheed, 2000;Butler & Callahan, 2014). According to Brewer et al. (2013), outsourcing is a broadbased phenomenon and various authors have developed a number of definitions. ...
Chapter
The objective of this research is to examine the influence of outsourcing on financial performance and competitive priories of Malaysian SMEs. A data sample of 100 SMEs was analyzed to examine these relationships. The analysis was conducted via Partial Least Squares. Based on the findings, while outsourcing has significant influence of SMEs financial performance in Malaysian context, outsourcing activities do not have an impact on competitive priorities. Outsourcing approach emphasizing on the establishment of core competitive advantage, allows Malaysian SMEs to get the numerous benefits such as overall sales growth, market share, net profit, return on investment, and financial liquidity.
... SMEs cannot be competitive, innovative and creative without the skilled employees. On top of that, SMEs also experience lack of technological capability in which they do not have sufficient financing to acquire technology that may be actually be very pertinent for them to be competitive and have a strong market position (Butler & Callahan, 2014). It can be surmised from past researchers that the main obstacles surround SMEs are lack of financial and technical resources, insufficient relevant market information and government support and inability to deal with international affairs to execute the business successfully. ...
... Outsourcing has long been regarded as the functions that can be more efficiently performed outside (Unal & Donthu, 2014), and thus generally, can be defined as a situation where a company purchases a value creating activity from external vendors which was or could have been done in-house (Gilley & Rasheed, 2000;Butler & Callahan, 2014). According to Brewer et al. (2013), outsourcing is a broadbased phenomenon and various authors have developed a number of definitions. ...
Chapter
The objective of this research is to examine the influence of outsourcing on financial performance andcompetitive priories of Malaysian SMEs. A data sample of 100 SMEs was analyzed to examine theserelationships. The analysis was conducted via Partial Least Squares. Based on the findings, while outsourcinghas significant influence of SMEs financial performance in Malaysian context, outsourcingactivities do not have an impact on competitive priorities. Outsourcing approach emphasizing on theestablishment of core competitive advantage, allows Malaysian SMEs to get the numerous benefits suchas overall sales growth, market share, net profit, return on investment, and financial liquidity.
... The influence of such employees has increased dramatically especially after the Libyan revolution which took place on February 2011. In fact, most of the previous studies have focused only on perceptions and decisions taken by top management regarding future of affected employees from outsourcing an activity (Butler and Callahan, 2014;Kakabadse and Kakabadse, 2005), and how their attitude was affected after implementing outsourcing (Çiçek and Ozer, 2011). Çiçek and Ozer (2011) add that the effect of an aggressive culture on outsourcing employees requires more investigation. ...
... TCT's core premise is based on the assumption that administrators may export particular corporate tasks based on perceived immediate financial advantage before considering indirect costs. The purpose of outsourcing specific HR operations is to obtain advantageous operational costs or boost effectiveness by engaging outsourcing services to handle HR functions (Butler and Callahan, 2014). The resource based view (RBV) theory is also considered as an alternative theory to TCT and is frequently utilized by academics to investigate outsourcing. ...
Article
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The study's overarching purpose was to investigate the impact of strategic HR outsourcing on organizational sustainability. This study also attempted to evaluate the function of organizational capabilities and HR proficiency as a mediator in the relationship between strategic HR outsourcing and organizational sustainability. Data was collected from 400 HR professionals in China using a questionnaire technique. The Smart-PLS software and a structural equation modeling (SEM) technique were used to evaluate the data. Organizational sustainability was found to be insignificantly related to strategic HR outsourcing. Furthermore, organizational capabilities and HR proficiency were discovered to mediate the association between strategic HR outsourcing and organizational sustainability. By analyzing the impact of strategic HR outsourcing on organizational sustainability, this paper provided an important theoretical contribution. In terms of practical applications, this article would surely help HR professionals to maintain and develop policies to encourage employees to be engaged and perform well. Furthermore, this study might be effective in resolving difficulties linked to organizational sustainability. The small sample size of this study, which included solely HR professionals working in Chinese firms, was one of its limitations. In addition, future studies can incorporate other constructs to acquire a deeper knowledge of the factors that influence employee health.
... Since then there has been a massive paradigm shift in such a business outlook [9,10]. Traditionally, outsourcing practices were confined to peripheral jobs like cleaning, catering, and security that has shifted to potential core jobs like design, research and development, manufacturing, mining, human resource, sales and marketing [11][12][13][14][15]. A large number of firms view outsourcing as a value-addition process and a means to achieve business transformation [16,17]. ...
Chapter
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In the present era of globalization, outsourcing proves to be one of the prominent and emerging business practices widely adopted by the firms around the world in order to stay competitive. The academic literature on outsourcing in the Indian context mostly deals with the outsourcing of information technology/information systems (IT/IS) and business process outsourcing (BPO) that are outsourced to Indian IT firms by the multinational companies (MNCs) located abroad. However, studies on outsourcing practices followed by the Indian firms may be inadequate in the extant literature. It was observed that the decision of outsourcing is often taken in an aggressive manner with an emphasis on short-term cost advantage rather than giving due consideration in realizing the significant contribution of such decisions over the long-term competitiveness of the organization. The present study provides a structured approach to analyze the suitability of outsourcing in line with the organizational strategy for performance improvement for the coal mining organization in India.
... However, that is not always the case. Despite the intensity and variety of human resource activity needs of an organization, some firms will not always choose to outsource their HRM needs to external providers (Butler and Callahan, 2014). Thus, research in the field attempts to unravel factors which contribute to the tendency and urge to outsource human resource services. ...
... The economic reason is the need of firms to cut costs, such as operational and labor cost in order to improve profitability and add value and save cost with the aim to gain efficiency and improve revenues (Hung Lau & Zhang, 2006). More typical strategic reasons have recently distinguished HRO, including focus on core competences, ensure organization's position in the marketplace (Hartman, Ogden & Hazen, 2017), call for participation of HR departments in strategic issues, achieve greater business flexibility, improve quality by achieving economies of scale, gain access to specialized HR external expertise (Butler & Callahan, 2014;Chiang, Chow & Birtch, 2010;Delmotte & Sels, 2008;Gilley, Greer & Rasheed, 2004;Glaister, 2014;Klaas et al., 2001;Klaas, McClendon, & Gainey, 1999;Quartey, 2013) who have competency in the areas concerned and can offer excellent quality and efficiency (Tremblay et al., 2008;Woodall, Scott Jackson, Newham & Gurney, 2009). In this context, outsourcing some HRM functions can be seen as an opportunity for the internal HR departments (Delmotte & Sels, 2008) as they can focus on what the organization does best, and contract everything else outside (Belcourt, 2006). ...
Article
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Purpose: The paper aim to explore the evolution in the use of HRO in Spanish firms, and determine the differences in the degree of implementation of HRO since 1999 until 2014, and also analyze the relationship between HR outsourcing and devolution of HR responsibilities to line managers in Spanish organizations. Design/methodology/approach: This paper combines quantitative and qualitative methods. Namely the article is based on international Cranet HRM survey data collected from private and public organizations and also interviews with HR external providers. Findings: The analysis of developments, based on the Cranet surveys and interviews with HR external providers shows that during the past few years there has been an increasing use of HRO in parallel with the tendency to devolve more HR responsibility to line managers. Research limitations/implications: The main limitation of this research is the limitation of data about reasons for devolution that the CRANET questionnaire provides. However, the interviews carried out enrich the survey data with qualitative results. Practical implications: The findings can be used to guide management teams in outsourcing and devolution decisions to maximize benefits to their organizations. Originality/value: This paper is about the evolution of HRO in Spain as a European Union country where published research on HRO and also its implications is relatively limited. The originality of this paper is mainly the involvement of line manager in the outsourcing process which have been poorly analyzed until now.
... The decision to outsource has traditionally been taken from the perspective of costs (Williamson, 1975), with the decision taken to subcontract an activity if this results in a cost reduction. Thus financial improvements are one of the main reasons for outsourcing, although other strategic aspects are also involved, such as a greater focus on the company's core business and increased flexibility (Lau and Zhang, 2006;Varadarajan, 2009;Butler and Callahan, 2014). ...
Article
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Outsourcing has been identified as one of the key factors for improving companies’ financial performance. Moreover, the procurement of business services has become an important element of companies’ acquisition of external resources. However, there is a lack of evidence linking services outsourcing and performance. Limited prior literature has mostly assumed that this relationship is positive and linear. Our empirical study reveals that firms may be able to increase their performance through services outsourcing; however, this is only true up to a point, beyond which the performance decreases as a consequence of further outsourcing. Identifying the type of relationship between the variables under study is a key point to company managers formulating their service outsourcing strategies. They must be aware that there is a level of outsourcing that should not be exceeded. Future research should help managers to determine which is the most effective level of service outsourcing for their companies.
... With the rise of global competitive industries has come the required implementation of outsourcing various projects and programs. Human resources have adopted outsourcing as a means to improve performance; however, Butler and Callahan (2012) have noted that existing literature fails to empirically confirm this. Human resource outsourcing has demonstrated benefits in terms of developing strategic partnerships and relaying employee concerns to top decision makers within a company (Davidson, 2005). ...
Article
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Abstract: Existing research has focused on the utilization of outsourcing as a function for human resources. However, applying project management principles to human resource outsourcing has not been studied. This report examines the application of project management principles when outsourcing specific functions of human resources, specifically through a path-goal theory of leadership. This theoretical discussion examines the strengths and weaknesses associated with outsourcing human resource functions. Next we discuss the relevance of project management principles to the function of outsourcing. By doing so, we conclude that the path-goal theory of leadership is an appropriate approach for human resource project managers when aligning tasks to staff competencies. In particular, the leadership styles of supportive and participative were most relevant approaches to such decision-making practices. It was found that outsourcing relational components of organizational tasks were not recommended due to the negative impact on organizational culture.
... Just as HRO researchers continue to understand HRO practices across various contexts, research findings on the influence of firm size and sector on outsourcing HR has not been conclusive. Several researchers such as Susomrith & Bro wn (2013), Sheehan (2009), Greer et al. (1999, Delmotte & Sels (2008) and Butler & Callahan (2014) found that larger firms are mo re likely to outsource HR services. Ho wever, Lever (1997), Chiang, Chow, & Birtch (2010), Klaas et al. (2001) found that smaller firms are more likely to rely on HRO whilst Galanaki & Papalexandris (2007) found that firm size did not have effect on the degree of HRO. ...
Article
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Globally, many organisations outsource human resource functions selectively to achieve operational efficiency and transformation. Research in the Malaysian context is limited and insights on the latest HRO trends which are important to understand the HRO phenomenon in Malaysia are unavailable. The questionnaire survey was used to elicit data in this study. 145 HR managers from various sectors responded. 58 of them have partially outsourced the HR functions. Findings indicate that firms from manufacturing and services sectors were both outsourcing at about 40 percent. Large firms appeared more receptive toward HRO compared to smaller firms. Training, recruitment and payroll were the top three HR functions outsourced. More than half of the HRO decisions were made by the top management. This study found that the two main drivers of HRO were resource-based benefits and cost benefits. Among the benefits investigated were keeping up with changes, less investment in and maintenance of, software, access to best practices or new development, and converting fixed costs to variable costs. The future direction of the Malaysian HRO is likely to revolve around HR traditional functions such as training, recruitment and performance management in the next five years.
... In the same vein, both Greer et al. (1999) and Delmotte and Sels (2008) argue that the larger the organisation, the higher the average level of outsourcing. A decade later, Butler and Callahan (2014) still found that larger firms are more likely to outsource HR services. ...
Article
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Purpose The purpose of this study is to provide deeper and broader insights into human resource outsourcing (HRO) trends and practices specific to the Malaysian context. Design/methodology/approach Data were collected from HR managers through a questionnaire-based survey, using convenient sampling with random selection. Findings HRO practices were found to have evolved into second-generation outsourcing, with considerable potential to grow further in the future. Firm size and sector had little or no effect on the degree of HRO. Both cost benefits and resourced-based benefits were key drivers of HRO decisions, with a majority of the firms reporting having achieved these benefits equally and positively. Most of the functions outsourced were traditional-transactional HR functions. Slightly more than half of the HRO decisions were made by top management without the involvement of HR managers. More than half of the firms surveyed intended to do more outsourcing in the near future (i.e. within the next two to five years), including firms that had previously experienced HRO failure. Research limitations/implications While convenience sampling limits the generalisability of the findings, it is suitable for a study like this, especially as there is no pre-established list of firms outsourcing HR available in Malaysia. The study did not cover trends in either HR shared services or insourcing – either of which could potentially affect future HRO trends in the future. The findings also serve as a warning to future HRO researchers about the importance of contextual knowledge to strengthen the validity of their findings. Practical implications The findings provide both practitioners and service providers with insights into HRO practices and trends in Malaysia, which are comprehensively discussed in the paper. Originality/value This paper presents a broad, yet up-to-date, overview of HRO practices and trends specific to the Malaysian context. It covers aspects and details of HRO not explored or explicitly discussed before.
... Gree (1999) pointed out network marketing includes attract customers, customer participation, retain customers, customer feedback and customer related digital marketing framework of research, to help B2C companies to select the appropriate network marketing tool [3].Gilley (2004) proposed a performance evaluation system from two aspects of sales revenue and web site analysis program, and proposed the different measures of the four types of enterprises [4].Maureen (2014) believes that online marketing is based on the network tools and online resources to carry out marketing activities, the traditional marketing theory and the unique interactive capabilities of the Internet marketing methods [5], both in the online marketing activities for the virtual market, but also to carry out the online services in the traditional tangible marketing activities, but also in the network to carry out the traditional means of marketing activities in the network virtual marketing. Lever (1997) believes that online marketing is through the use of digital technology to achieve the purpose of marketing activities, is a broad concept, involving how to use the Internet and traditional media integration to get customers, and to provide services [6]. ...
... Among them, some scholars pay attention to the resources put into the stage to define organizational effectiveness, organizational effectiveness is refers to the enterprise organization for the predetermined objectives are achieved results of members of the implementation of a kind of collective efficacy management, including in the process of production and operation of the group working ability, efficiency, quality and other. Some scholars focus on the run from the internal organization of the stage to define the organization efficiency; some scholars pay more attention to the organizational output stage to define organizational effectiveness [13][14]. Organizational effectiveness is the organization to achieve its goals; in the definition of organizational effectiveness, should pay attention to three key points: one is the overall performance of the fabric is set, the organizational effectiveness should be more macro and comprehensive perspective to explain the overall situation and performance of enterprises; two is the goals of the organization, namely the evaluation of an organization's business activities, we must consider a number of multi level measure between the standard and the relationship between the three; is a common social expectations, which is not only the success of the enterprise focuses on the internal operation, but also effectively meet the needs of different stakeholders on its requirements and expectations. ...
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With the development of network economy, modern service industry which based on network technology has developed rapidly; HRM should pay more attention to network knowledge and technology. However, most companies still understood human resources management as recruitment, personnel management and performance appraisal. In this paper, the authors analyze the characteristics of strategic human resource management, and study on how strategic human resource management will influence on organizational effectiveness. By using network data, the result shows that strategic human resource management has a significant positive impact on organizational effectiveness. Strategic human resource management model can explain 62.9% variation of team factor, 63.1% variation of flexible factor, 65.9% variation of hierarchy factor and 66.8% variation of market factor. At the same time, organizational culture and commitment has played an intermediary role between strategic human resource management and organizational effectiveness.
... Gilley (2004) argues that the outsourcing can for the enterprise cost savings, improve the competition status and work efficiency, eliminate the risk, in addition to HRO may also bring the transaction cost rise, and affect the value of the company and the other from the supplier risk [14]. Maureen (2014) make summary of HRO risk includes loss to enhance their own human resources skills opportunity loss to enhance skills related to opportunity, the foreign contractor produced dependence and lose control of risk [15]. Lever (1997) pointed out that human resource outsourcing may produce two risks: one is enterprise in outsourcing subcontractors over reliance on, another risk is the human resources outsourcing business efficiency and quality of work did not achieve the original expectations of enterprise, thus fundamentally shadow ring to the overall efficiency of enterprises [16]. ...
... Por su parte, el offshoring está asociado a las actividades que se trasladan a países con mano de obra más barata (Metters y Verma, 2008; Wernerheim, 2012; Bertrand y Mol, 2013). El objetivo principal de tercerización es reducir costos (Lacity & Hirsham 1993; Agrawal, Goswami, y Chatterjee 2010; Butler & Callahan, 2012), lo cual es consistente con la teoría de costo de transacción (Coase, 1937; Williamson, 1975 Williamson, , 2008). Otros factores inf luyentes para establecer contratos de tercerización incluyen el fortalecimiento o desarrollo de una ventaja competitiva basada en recursos naturales y humanos (Wernerfelt, 1984; Barney 1991). ...
Article
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Este estudio evaluó la relación entre tercerización y el desempeño financiero de las empresas en Estados Unidos de Norte América (2000-2009). Con este fin, se calculó el efecto de tercerización en dos variables: la rentabilidad y la liquidez. En el primer caso se utilizó el margen operacional antes de interés e impuestos, el retorno sobre activos y el retorno sobre patrimonio; mientras que en el segundo caso, se empleó la razón rápida, la razón de deuda a total de activos y la razón de deuda a patrimonio neto. Se utilizaron los cambios porcentuales en los parámetros financieros en el año de anuncio de tercerización (t0) y el año subsiguiente (t1), los cuales resultaron no significativos (α = 0,05) para las empresas que tercerizan. También, no se encontró diferencias significativas (α = 0,05) en la rentabilidad y liquidez de las empresas con anuncios de tercerización y aquellas sin ellos.
... Likewise, the result of Butler and Callahan (2012) shows a negative long term effect on operating performance if outsourcing participation is not optimal. .Therefore, Hypotheses 3a and 3c are supported but 3b and 3d are not. ...
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This research proposes a conceptual model and research proposition to investigate the relationships among the external institutional factors, internal resources and capability factors, environmental management system (EMS) implementation, environmental performance, and financial performance to explain the phenomenon of ISO 14000 (proxy of EMS) implementation of manufacturing firms. This conceptual model and research propositions build on institutional theory, resource-based view of the firm, and relevance literature of environmental management system implementation. The conceptual model and research proposition postulates that both the external institutional factors and internal resources and capabilities are positively related to environmental management system implementation. The implementation of EMS is hypothesized to be positively associated with both environmental and financial performance. Moreover, environmental performance is proposed to have a positive relationship with financial performance. This research describes theory and practice of ISO 14000 in order to, gain competitive advantage and firm performance. Moreover, this research suggests venues for future in environmental management system.
... Increasing innovation capacity, economic gain and cost reduction, product and service quality promotion, customer satisfaction, performance improvement, effectiveness, responsiveness improvement and flexibility in front of market fluctuations and customers' demands, skills and technologies acquisition, release internal resources to focus on key functions of organization, and access to human resources expertise are benefits which lead organizations to outsource (Butler, Callahan 2012;Cheshmberah, Mortazavi 2007;Li 2012;Liou, Chuang 2010;Winter, Baguley 2006). Meanwhile, outsourcing helps organization to be agile in cost management through flexible resources, but this agility is not gratis. ...
Article
The aim of the current study is to select the best strategies for outsourcing development, applying decision-making tools that enable to make reasoned decision. To evaluate outsourcing strategies, a new model of Comprehensive Framework for Strategy Formulation and Selection is presented. Development of outsourcing of healthcare services in Tehran is analysed in the paper. Strengths, Weaknesses, Opportunities, and Threats analysis is used to evaluate the internal and external factors affecting the outsourcing of healthcare services in health deputy of the Tehran University of Medical Sciences in different aspects and to develop several possible outsourcing strategies. Quantitative Strategic Planning Matrix is applied for quantitative evaluation of strategies. It is proposed to validate the approach by applying Multiple Criteria Decision Making methods. Robust and accurate Weighted Aggregated Sum Product Assessment method is selected and applied for quantitative evaluation of strategies. Based on the consistency of the results of the both approaches, the five best strategies to develop healthcare services outsourcing are offered. First published online: 29 Apr 2014
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The purpose of this study to calculate the sub-vector efficiency of outsourcing of activities of Yazd Water and Sewerage Company in managing the quality of urban drinking water. This study was conducted during 2016-2017 with the sub-performance efficiency method in GAMS software. This study uses the variables of water branch installation cost, repair and replacement cost of meter basin assembly parts, subscriber branch repair cost reduction, network accident elimination cost and message center operator cost as model inputs and variables of branch installation number, accident elimination number, Subscriber branching and number of accident elimination of water supply network as model outputs have been done in Bafgh, Ardakan, Ashkzar, Zarch, Mehriz, Abarkooh and Taft cities of Yazd province. The results of performance measurement for different activities in different units of Yazd Province Water and Sewerage Company indicate that in outsourcing activities to contracting companies, the status of efficiency and productivity is not well monitored and it seems that only financial aspects are effective in managers' decisions. Therefore, it is suggested that the implementation of productivity improvement management cycle by activity in the field of operation should be on the agenda of the headquarters and middle managers of the Water and Sewerage Company.
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This paper examines the antecedents and performance outcomes of sourcing portfolio diversity in firms’ new product development (NPD). Sourcing portfolio diversity measures the degree to which a firm uses multiple sourcing choices along both organizational and geographic dimensions including domestic in-house sourcing, domestic outsourcing, captive offshoring, and offshore outsourcing. We extend transaction cost economics (TCE) to the portfolio level of analysis and predict that sourcing portfolio diversity in NPD is driven by heterogeneity in two transactional characteristics—technological application diversity, reflecting asset specificity, and variance in project-stage uncertainty. We also argue that the positive effect of sourcing portfolio diversity on firms’ financial performance is driven by aligning sourcing portfolio configuration with the sources of transactional heterogeneity, increased strategic agility, and complementarities between individual sourcing choices. Our empirical study of NPD in the bio-pharmaceutical industry confirms our predictions. We contribute to research on sourcing and NPD by conceptually building and empirically establishing relevance of the sourcing diversity at the portfolio level of analysis and bringing the question of sourcing strategy to the forefront of NPD portfolio management concerns.
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Background & Purpose: In the current era, due to the intense competition of organizations to attract qualified and talented people, organizations try to empower their human resources. Therefore, organizations pay special attention to their training process and development to overcome this issue. As a result, the aim of this study was to identify and prioritize the effective criteria in outsourcing the human resources training process and selecting the best educational institution.
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p>This study aims to systematically synthesize more than 20 years of human resource outsourcing (HRO) studies in a way that is meaningful, concise and, useful to HRO researchers and practitioners. Using grounded coding technique blended with integrative literature review, empirical papers published from 1997 to 2018 are examined. This is the first HRO literature review using such techniques to answer three key research questions: What has the existing empirical academic literature revealed about the determinants of HRO decisions and outcomes? What are the key issues emerged from the literature? What are the gaps in knowledge which warrant future HRO research? Other than providing a comprehensive insight into an emerging research area, this review also contributes to laying an important foundation for the initial descriptive HRO theory development. 36 dependent variables and 99 independent variables over 449 relationships were coded.</p
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There are not many books that are genuine classics, and only a handful in business and management whose insights and ideas last for 50 years and more. This book is one of the very few 'must reads' for anybody seriously interested in the role of management within the firm. Originally published in 1959, The Theory of the Growth of the Firm has illuminated and inspired thinking in strategy, entrepreneurship, knowledge creation, and innovation. Edith Penrose's tightly-argued classic laid the foundations for the resource based view of the firm, now the dominant framework in business strategy. She analyses managerial activities and decisions, organizational routines, and also the factors that inevitably limit a firm's growth prospects. For this new anniversary edition, Christos Pitelis has written a new introduction which both tells the story of Penrose's extraordinary life, and provides a balanced assessment of her key ideas and their continuing relevance and freshness.
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Much of the attention in the risk literature focuses on organizational risk. This research argues that industry-level risk indirectly influences firm performance in addition to the direct effects of organizational risk. We contend industry-level risk norms influence market performance. Our general hypothesis is that when managers pursue strategies that deviate from industry risk norms, the firm's market performance will decline. We also test for the moderating effects of performance relative to targets and managerial ownership. The general hypothesis was supported for market risk and returns risk, but not for strategic risk. In addition, performance relative to target moderates this deviation-market performance relationship for market and returns risk. These findings have implications for the risk literature, particularly a firm's risk premium, and institutional theory, in terms of the tradeoff related to conformity to norms.
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Using hierarchical regression analysis on a sample of UK service firms, this study tests the impact of asset specificity on outsourcing relationship performance within a disaggregated methodological framework that allows to discern the specific effects of various buyers and suppliers' individual dimensions of asset specific investments. The results indicate that the impact of asset specific investments on outsourcing relationship performance varies according to the particular specificity dimension examined. While all statistically significant dimensions of buyers' asset specificity have a negative impact on relationship satisfaction, suppliers' human and dedicated asset specific investments exert a positive and significant influence. The results also show that, in three interaction instances, reciprocal specific investments are positively associated with outsourcing relationship performance. These findings have profound theoretical and methodological implications.
Article
A central issue in manufacturer-supplier relationships revolves around mechanisms that regulate or control exchange processes. An experimental test of a model of relational closeness is provided, representing an extension to the basic transaction cost economics framework. The model draws on relational exchange theory in the treatment of governance. Subjects for the experiment were midlevel purchasing personnel, drawn from aerospace, electronics, and defense contracting firms. Findings demonstrate that transaction costs are influenced by dimensions of the exchange, including asset specificity and external uncertainty.In turn, transaction costs are linked to important dimensions of relationalism. Implications for theory and practice are presented.
The current study examined the longitudinal impact of ERP adoption on firm performance by matching 63 firms identified by Hayes et al. [J. Inf. Syst. 15 (2001) 3] with peer firms that had not adopted ERP systems. Results indicate that return on assets (ROA), return on investment (ROI), and asset turnover (ATO) were significantly better over a 3-year period for adopters, as compared to nonadopters. Interestingly, our results are consistent with Poston and Grabski [Int. J. Account. Inf. Syst. 2 (2001) 271] who reported no pre- to post-adoption improvement in financial performance for ERP firms. Rather, significant differences arise in the current study because the financial performance of nonadopters decreased over time while it held steady for adopters. We also report a significant interaction between firm size and financial health for ERP adopters with respect to ROA, ROI, and return on sales (ROS). Specifically, we found a positive (negative) relationship between financial health and performance for small (large) firms. Study findings shed new light on the productivity paradox associated with ERP systems and suggest that ERP adoption helps firms gain a competitive advantage over nonadopters.
Article
Transaction-cost economics has been applied to a wide range of research areas; however, the definition of transaction-specific asset (TSA) has been overlooked. Content analysis of previous research suggests six dimensions (specificity, magnitude, durability, value-in-use, importance, and risk) and six types (site, human, physical, dedicated, brand name, and temporal assets) of TSAs. Prior empirical operationalizations of TSAs are also content-analyzed, and results indicate that although all six types of TSAs have received research attention, only three dimensions have been empirically addressed. Correspondence analysis is used to examine the relationships among the types and dimensions of TSAs.
Article
This study examines whether the new ventures success of small and medium enterprises (SMEs) in the biotech industry relates with the characteristics of strategic alliances. The study advances a research conceptual framework. Using sampling data gathered from 189 Taiwan biotech firms through a benchmarking questionnaire, the study tests six hypotheses employing structural equations. The findings are generally consistent with the literature. The study supports all hypotheses. Consequently, the results show that strategic alliances improve SMEs' new venture success. This research provides managerial implications for both entrepreneurs and managers and some suggestions for future research.
Article
This paper studies economic determinants of IS outsourcing. It argues that a focus on comparative economic theories and models can improve our ability to explain outsourcing within the larger context of organizational strategy and environment. Specifically, the research constructs of production cost, transaction cost, and financial slack are examined simultaneously to understand what influences the outsourcing decision. To empirically test these relationships, information was gathered from senior IT managers in 243 U.S. banks. Financial indices from the archives of the Federal Reserve Bank were a second important source of data.Results of the study show that IS outsourcing in banks was strongly influenced by production cost advantages offered by vendors. Transaction costs played a role in the outsourcing decision, but it was much smaller than production costs. Finally, financial slack was not found to be a significant explanator, although firm size was a significant control factor. The paper has important implications for research and practice. For researchers, the findings provide evidence that financial criteria can be key factors in outsourcing decisions and compare the relative effects of production and transaction costs. For practitioners, the findings suggest that managerial sourcing strategies need to weigh both costs when hiring systems integrators.
Article
As the use of outsourcing as a staffing strategy continues, it is important to understand how the landscape of human resource management shifts in response to this strategy. Much of the existing outsourcing research in human resource management and organizational behavior has examined individual-level responses. In this article, we use this research to identify the outsourcing-related challenges facing HR professionals in both the service provider and client organizations as they strive to attract, motivate, and retain high-performing employees and explore HR practices that may help achieve organizational goals. Areas in need of additional research are also identified. copyright 2008 Wiley Periodicals, Inc. [ABSTRACT FROM AUTHOR] Copyright of Human Resource Management is the property of John Wiley & Sons, Inc. and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)
Book
Economic theory has suffered in the past from a failure to state clearly its assumptions. Economists in building up a theory have often omitted to examine the foundations on which it was erected. This examination is, however, essential not only to prevent the misunderstanding and needless controversy which arise from a lack of knowledge of the assumptions on which a theory is based, but also because of the extreme importance for economics of good judgment in choosing between rival sets of assumptions. For instance, it is suggested that the use of the word “firm” in economics may be different from the use of the term by the “plain man.” Since there is apparently a trend in economic theory towards starting analysis with the individual firm and not with the industry, it is all the more necessary not only that a clear definition of the word “firm” should be given but that its difference from a firm in the “real world,” if it exists, should be made clear. Mrs. Robinson has said that “the two questions to be asked of a set of assumptions in economics are: Are they tractable? and: Do they correspond with the real world?” Though, as Mrs. Robinson points out, “more often one set will be manageable and the other realistic,” yet there may well be branches of theory where assumptions may be both manageable and realistic.
Article
Outsourcing refers to the practice of a firm entrusting to an external entity the performance of an activity that was performed erstwhile in-house. Although off-shoring and offshore outsourcing to suppliers have dominated much of the recent discussion and debate on outsourcing in scholarly journals and the business press, the nature and scope of outsourcing that does not transcend national boundaries, and outsourcing to entities other than to suppliers is quite substantial. Against this backdrop, a five sources outsourcing framework delineating a broad array of outsourcing avenues available to firms is proposed. For the most part, lowering costs as a motive underlying off-shoring and offshore outsourcing have dominated recent discussion. Furthermore, in the aftermath of the rapid growth in offshore outsourcing in the services sector, the technological forces underlying these developments have been extensively written about. Against this backdrop, the relevance of considerations other than cost in the outsourcing decisions of firms, and the role of technology in automating and thereby either making redundant an erstwhile outsourced activity or performing the activity in-house are discussed.
Article
In the face of the global challenges of rapid transitions in technologies and markets, R&D activity has become one of the main ways for companies to engage in innovation. In addition, minimizing transaction cost is no longer sufficient to ensure a company's survival; therefore, companies must investigate and acquire resources to facilitate innovation within the organization. This study investigates corporate motivation and the performance of R&D alliances among machinery manufacturers in Taiwan. To explore the relationships between motivation and performance, this study adopts two distinct but complementary perspectives on R&D alliances: transaction-cost economics (TCE) and resource-based theory (RBT). This study includes the administration of a survey to explore the issues of motivation of companies participating in R&D alliances, types of governance structure in alliances, relationships between governance structure and performance, and relationships between motivation and performance of an R&D alliance in Taiwan's machinery industry (the TMI). The results in this study assert that corporate motivation as derived from both TCE and RBT perspectives has a significant positive relationship with the performance of R&D alliances; however, the other moderating variables, such as types of governance structure and corporate attributes, do not have a significant impact on the performance of R&D alliances in the TMI.