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Human resource outsourcing: Market and operating performance effects of administrative HR functions
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.
... A great deal of previous studies argues that in the age of globalization, firms in developing countries can be immensely benefitted from outsourcing HR functions from the viewpoint of their strategic aspects. Previous studies claim that the strategic decision to outsource HR functions aims to minimize costs in situations where in-house expertise is lacking, leading to the outsourcing of both core and non-core HR functions, particularly beneficial in uncertain demand scenarios [5][6][7][8][9]. A study by Coggburn [6] also argues similarly in favor of cost efficiency that when the external vendor provides the same service at a lower cost than the in-house service maker, it is called cost-effectiveness. ...
... Academics and practitioners echo the same while considering the value of HRO practices to drag down the costs by adopting flexible employment demands, improving customer services, and maintaining global standardization [5,20,21]. Although it appeared as a concept more than two decades ago, scholarly contributions in this domain gained momentum in 2010, and since then, it has maintained an erratic growth trend. ...
... Earlier scholars defined HRO that primarily focused on these key advantages. For instance, Butler [5] defines HRO and argues that HRO is what an organisation shares its human resource functions and transfers internal work responsibility to an outside supplier for getting HR related services. Whereas Zhao [24] takes a utilitarian perspective in defining HRO, emphasizing that it involves outsourcing HR centric tasks to external organisations. ...
This study aims to comprehensively review the literature on human resource outsourcing (HRO) published from 2001 to 2021. The study begins with metadata analysis on 69 papers and presents insights into 32 papers on HRO identified from the Scopus and ISI Web of Science databases. The literature is classified based on content analysis, which comprises conceptual understanding, drivers and barriers, functions outsourced, and firm performance. The study reveals that cost advantage, organisational learning, and the opportunity to concentrate on core business functions motivate the organisation to practice HRO. However, the lack of psychological contact among current employees, the risk of opportunism in the freelancing organisation, lack of management legislation, and prior experience are the common barriers to HRO adoption. Despite thesedrawbacks and barriers, recruitment, payroll processing, and technology-centric human resource (HR) activities are standard HR functions outsourced by organisations. The contributions of this study are to offer an integrated and conclusive definition of HRO and provide a simple, easy-to-understand, yet comprehensive framework for understanding HRO practices in any organisation. Researchers and academicians can utilize this paper to explore future research directions while gaining a thorough understanding of the HRO concept.
... A great deal of previous studies argues that in the age of globalization, firms in developing countries can be immensely benefitted from outsourcing HR functions from the viewpoint of their strategic aspects. Previous studies claim that the strategic decision to outsource HR functions aims to minimize costs in situations where in-house expertise is lacking, leading to the outsourcing of both core and non-core HR functions, particularly beneficial in uncertain demand scenarios [5][6][7][8][9]. A study by Coggburn [6] also argues similarly in favor of cost efficiency that when the external vendor provides the same service at a lower cost than the in-house service maker, it is called cost-effectiveness. ...
... Academics and practitioners echo the same while considering the value of HRO practices to drag down the costs by adopting flexible employment demands, improving customer services, and maintaining global standardization [5,20,21]. Although it appeared as a concept more than two decades ago, scholarly contributions in this domain gained momentum in 2010, and since then, it has maintained an erratic growth trend. ...
... Earlier scholars defined HRO that primarily focused on these key advantages. For instance, Butler [5] defines HRO and argues that HRO is what an organisation shares its human resource functions and transfers internal work responsibility to an outside supplier for getting HR related services. Whereas Zhao [24] takes a utilitarian perspective in defining HRO, emphasizing that it involves outsourcing HR centric tasks to external organisations. ...
... 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). ...
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.
... That being said, the decisions that need to be made about allocating the time that artificial intelligence saves to other tasks will determine whether or not job demands change. Present articles seem to indicate that there will theoretically be more time available, so in a way, this could also mean that doctors can simply see more patients, which would increase their stress levels even more [15]. ...
... Artificial intelligence (AI) technologies can improve productivity, facilitate better decision-making, and improve a company's staffing practices. [15] Organizations can improve their acquisition, training and growth processes with the advancement of AI technologies. It used to take hiring managers hours to sift through tons of applications and resumes to find eligible applicants [16]. ...
... Ordanini and Silvestri (2008), Lever (1997) Operating performance The client's operating performance, generally measured by the operating return on assets. Butler et al. (2010), Butler and Callahan (2014) Competitive advantage The extent which the outsourced activity provides an organisation a competitive advantage. Galanaki et al. (2008) Change management The client's decision to outsource activities related to change management to service providers. ...
... Make or buy The client's basic decision to retain the activity in-house or to outsource it to service providers Shaw and Fairhurst (1997), Chiang et al. (2010), Galanaki and Papalexandris (2007), Butler and Callahan (2014) Transactional functions The degree which clients depend on service providers to perform or assist their transactional activities. ...
... Ordanini and Silvestri (2008), Lever (1997) Operating performance The client's operating performance, generally measured by the operating return on assets. Butler et al. (2010), Butler and Callahan (2014) Competitive advantage The extent which the outsourced activity provides an organisation a competitive advantage. Galanaki et al. (2008) Change management The client's decision to outsource activities related to change management to service providers. ...
... Make or buy The client's basic decision to retain the activity in-house or to outsource it to service providers Shaw and Fairhurst (1997), Chiang et al. (2010), Galanaki and Papalexandris (2007), Butler and Callahan (2014) Transactional functions The degree which clients depend on service providers to perform or assist their transactional activities. ...
... 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? ...
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. ...
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. ...
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.
... This is different from the results of our expected study, as the personnel agency system appeared late, some hospitals' personnel agency systems are not perfect and there are still many problems. For example, (18.13) the responsibilities in the work are not clear enough and the management methods are backward [75]. Therefore, before the study was conducted, we thought that personnel agency nurses would have a more negative evaluation of NS, and this finding should be confirmed in more surveys in the future. ...
Background
Most medical organizations accept many nursing students each year who gain clinical practice skills under the supervision of clinical nurses. However, there are no assessment tools to measure the contributions nursing students make to the clinical setting during clinical practicum. This study aimed to translate the 'Nursing Student Contributions to Clinical Settings' scale into Chinese and test its reliability and validity from the perspective of Chinese clinical nurses. And to explore whether nurses' personal and professional characteristics are related to nurses' perception of nursing students' contributions to the clinical settings.
Methods
The original scale was translated into Chinese following the Brislin translation model. A convenience sample of 935 clinical nurses was selected from January to March 2024 for the survey. The content validity of the scale was assessed by expert consultation and content validity index. Exploratory factor analysis and confirmatory factor analysis were performed to assess the construct validity of the scale. The reliability of the scale was measured using internal consistency, split-half reliability, and test–retest reliability. The measurement quality of the scales was assessed according to the COnsensus-based Standards for the selection of health Measurement INstruments. One-way analysis of variance was used to identify variables related to students’ contributions.
Results
The content validity index of the scale was 0.983. Exploratory factor analysis supported a one-factor structure, and the cumulative variance contribution was 71.177%. Confirmatory factor analysis showed that the model fit indicators were all within the acceptable range. The McDonald's Omega coefficient and Cronbach's alpha coefficient for the scale were 0.983. Nurses perceive that nursing students' contribution to the clinical settings is influenced by nurses' personal characteristics, professional characteristics, and the hospital environment.
Conclusion
The Chinese version of the Nursing Student Contributions to Clinical Settings scale has good reliability and validity and can effectively and reliably measure the contributions of Chinese nursing students to clinical settings.
... Sistem outsourcing atau contractingout adalah model operasi perusahaan yang meningkatkan kemampuan perusahaan dengan menyerahkan beberapa pekerjaan atau sumber daya kepada perusahaan lain untuk dikelola. Hal ini dilakukan untuk menggabungkan berbagai komponen keahlian, keterampilan kritis, dan tenaga kerja yang memiliki motivasi tinggi (Butler & Callahan, 2014). Resource-Based View Theory menyatakan bahwa sumber daya dan kapabilitas internal perusahaan adalah dasar utama untuk keunggulan kompetitif dan kinerja perusahaan yang lebih baik. ...
Kajian ini bertujuan untuk memahami model konstruksi komitmen organisasi pada pekerja outsourcing. Hal ini dilakukan untuk melengkapi kajian sebelumnya yaitu faktor pendorong terbentuknya komitmen organisasi pada pekerja outsourcing. Keberadaan manajemen aset dalam strategi perusahaan merupakan suatu keharusan untuk meningkatkan kinerja perusahaan secara efektif dan efisien. Sistem outsourcing atau contracting-out dan penggunaan tenaga kerja upahan merupakan salah satu transformasi paling signifikan yang terjadi dalam organisasi kerja di semua ekonomi industri. Kajian ini menggunakan pendekatan kualitatif dengan metode studi kasus. Pendekatan resource-based view theory digunakan karena penciptaan iklim kerja pada tenaga outsourcing akan meningkatkan komitmen organisasi karyawan yang akan mendukung keunggulan perusahaan. Resource-based view theory dalam kajian ini menemukan bahwa pekerja outsourcing lebih menunjukkan dampak negatif terhadap kepuasan kerja dibandingkan dengan kontribusi keunggulan perusahaan, namun terdapat fenomena peningkatan komitmen kerja pada pekerja outsourcing di industri pembangkit listrik. Kesimpulan kajian ini menunjukkan bahwa konstruksi pembentukan komitmen organisasi pada pekerja outsourcing telah mempengaruhi konseptualisasi, operasionalisasi, dan komitmen terhadap pekerjaan itu sendiri.
... To address this issue, Administrations should concentrate on retraining and upgrading workers to take on new tasks and responsibilities that sound for a human touch. Artificial intelligence technologies can help organizations improve their HR processes, increase efficiency, and make more informed decisions [14]. ...
Artificial intelligence (AI) is rapidly transforming the way human resources (HR) functions are carried out in the health sector of China. This study aims to scrutinize the impact of artificial intelligence on the human resource functions operating in the healthcare sector through technological awareness, social media influence, and personal innovativeness. Additionally, this study examines the moderating role of perceived risk between technological awareness and human resources functions. An online questionnaire was administered to human resources professionals in the health sector of China to gather data from 363 respondents. Partial least squares structural equation modeling (PLS-SEM), a statistical procedure, is implemented to investigate the hypothesis of the projected model of artificial intelligence and human resource functions. The research findings reveal that artificial intelligence significantly influences human resource functions through technological awareness, social media influence, and personal innovativeness. Furthermore, perceived risk significantly moderates the relationship between technological awareness and human resource functions. The findings of this study have important implications for HR practitioners and policymakers in the health sectors of China, who can leverage artificial intelligence technologies to optimize and improve organizational performance. However, its adoption needs to be carefully planned and managed to reap the full benefits of this transformative technology.
... 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. ...
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]. ...
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). ...
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). ...
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). ...
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. ...
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. ...
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. ...
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). ...
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. ...
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. ...
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
Since artificial intelligence is still a relatively new technology, research on the effects of artificial intelligence on work performance in developing countries is still limited. Thus, the chapter aims to examine and analyze the effect of artificial intelligence on job performance among Tunisian employees, with gender as the moderator variable and experience as the mediating variable. A questionnaire was developed to test the model based on a dataset of 350 employees in different sectors. The generated data were analyzed using IBM SPSS.26 and IBM SPSS AMOS.26. The results of exploratory and confirmatory factor analyses showed the absence of an impact of artificial intelligence on job performance. In addition, the authors found no moderating effect of gender or mediating effect of experience on the relationship between artificial intelligence and job performance. However, the experience of the employee has a positive and significant impact on job performance.
This review paper aims to comprehensively analyze and synthesize existing literature on the outsourcing of human resource functions within the Micro, Small, and Medium Enterprises (MSME) sector. The MSME sector plays a crucial role in economic development, and as these enterprises grow, the need for effective human resource management becomes increasingly vital. Outsourcing HR functions has emerged as a strategic approach for MSMEs to optimize resources, enhance efficiency, and stay competitive in the dynamic business environment.
We document the size and scope of the industry of for‐profit vendors that now handles a considerable proportion of human resource tasks for individual US employers, a collection we describe as the human capital industry. Outsourcing these tasks changes how the human resources function is executed in ways we describe below. This change should matter to researchers if they are interested in choosing topics that have relevance, and it should also matter to teachers of human resources who want to present an accurate description of practice to students. Aside from the now remarkable size of the HR industry, arguably its most important attribute is its marketing efforts, which now drive the agenda for the field of HR. A concern about that agenda is that it often creates the perception of challenges for management when in practice no evidence of those challenges exists.
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.
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.
In 2020, the SEC issued amendments to Regulation S-K requiring filers to provide discussions related to their human capital (HC) management practices. We use textual analysis to extract qualitative characteristics of these disclosures for all available 10-Ks during the first two years of the mandate. We document that, instead of evolving towards “best in class” disclosure practices under the principles-based regulation, firms exhibit a regression towards the mean on each qualitative characteristic that we examine: length, number of topics, specificity, numerosity, readability, and similarity. In other words, although firms with poorer-quality disclosures improve over time, those with better-quality disclosures learn that they have overshot the average standard and reduce the quality of their disclosures. Further tests reveal that, notwithstanding their limitations, certain HC disclosure characteristics are significantly associated with employee ratings from Glassdoor as well as with firm value.
Keywords: Human capital, ESG, sustainability, linguistic analysis, disclosure, SEC regulation
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.
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
عدم توانایی سازمانها در ارائهی خدمات آموزشی تخصصی بر اهمیت برونسپاری مدیریت آموزش شرکتها به سازمانهای رکن چهارم آموزشی (4PT) افزوده است. مدیران PT۴ها به منظور پیادهسازی مفهوم مدیریت آموزش باید به آمادهسازی مؤلفههای مرتبط با ابعاد ارزشهای پیشنهادی به مشتریان خود، که زیربنای مدل پیادهسازی سیستم مدیریت آموزش هستند، توجه کنند. به دلیل کمبود چارچوب نظری در این حوزه، در این نوشتار مدلی برای پیادهسازی مدیریت آموزش سازمانها توسط 4PTها پیشنهاد شده است. روششناسی این پژوهش مبتنی بر رویکرد آمیخته است. در بخش کیفی از روش تحلیل تم، برای شناسایی رویکردهای اصلی در تدوین ابعاد مدل مفهومی استفاده شده است و در بخش کمّی با تجزیه و تحلیل سلسله مراتبی ابعاد مدل مفهومی رتبهبندی شده و در نهایت با استفاده از روشهای تحلیل عاملی و مدلسازی معادلات ساختار یافته مدل نهایی مورد تحلیل قرار گرفته است. طبق نتایج کسب شده از این کار تحقیقاتی ضمن تأیید مدل پیشنهادی، ارائهی مدیریت آموزش اثربخش توسط4PT ها بیش از هر چیز وابسته به نیازسنجی در کنار نیازآفرینی است و متغیرهای
دیگر در درجات بعدی اهمیت قرار دارند.
Although a substantial body of research has analyzed the overall impact of outsourcing on firm performance measured in shareholder value, a major portion of the between-study variance remains unexplained. Asset specificity related to the outsourcing category (e.g., a business process versus information technology) alone can explain only some of the observed differences in stock market reactions. By integrating insights from transaction cost economics and outsourcing research, we first explain how expected buyer opportunism negatively affects the overall performance of the outsourcing relationship and ultimately, the buyer's own shareholder value. We further argue that this opportunism can be predicted by national culture. We test this hypothesis by applying meta-analytic techniques to compare 4216 outsourcing announcements of firms from 19 cultural backgrounds. The results reveal that an opportunistic culture, represented by a high level of assertiveness combined with a low level of institutional collectivism, is a highly statistically significant predictor of stock market reactions to outsourcing announcements. When further integrating the outsourcing category, the meta-analytic weighted least squares regression becomes a strong predictor of stock market reactions to an outsourcing announcement.
Seyahat acentalarında dış kaynak kullanılan faaliyet alanlarının dağılımının ortaya konması araştırmanın temel amacıdır. Araştırmanın alt amaçları seyahat acentalarının, dış kaynaklardan yararlanma durumu ve gelecekte dış kaynak stratejisinden faydalanma istekleri, dış kaynaklardan yararlandıkları faaliyet alanları, dış kaynak kullanım şekilleri, dış kaynak kullanımında işbirliği yapacakları tedarikçilerde aradıkları özellikler, dış kaynak kullanımıyla organizasyon yapılarında gereksinim duymadıkları departmanlar ve seyahat acentalarını dış kaynak kullanmaya yönelten nedenleri belirlemektir. Bu kapsamda, Eskişehir’de faaliyet gösteren sekiz A grubu seyahat acentasıyla yüz yüze yarı yapılandırılmış görüşme yapılmıştır. Görüşmelerden elde edilen sonuçlar, acentaların çoğunun dış kaynak kullandığını ve gelecekte de bu stratejiden yararlanma yoluna gideceklerini, acentaların genellikle araç kiralama ve rehberlik hizmetlerinde dış kaynak kullanımına yöneldiklerini, işletmelerin tedarikçiler aracılığıyla dış kaynak kullanımını benimsediğini, finansal yetersizliklerin acentaları dış kaynak kullanımına yönelten en önemli etken olduğunu, acentaların dış kaynak kullanımında iş birliği yapacakları tedarikçilerin alanda deneyimli olmasını dikkate aldıklarını ve acentaların dış kaynak kullanımıyla bilgi teknolojileri ve pazarlama departmanlarına ihtiyaç duymadıklarını ortaya koymuştur.
This paper aims to find out the determinants of amount of cash holdings in developed and developing countries. One of the reason is because majority of studies that exist only focus on developed countries such as US or UK. Therefore, it is important to study cash holdings in the context of developing countries as well. Samples are drawn from DataStream Database using a sample period between 2009-2014 by including recent output with firm selection criterion based on data availability of firms (Al-Najjar, 2013), whereas financial firms with SIC codes 6000-6799 were not included as well as utility firms with SIC codes 4000-4999, resulting in total sample of 5402 observations from 23 countries. EViews was employed for the regression analysis with amount of cash holdings as the dependent variable. The results show that most of the hypotheses are not confirmed because of insignificant results and/or unexpected signs of coefficients. As the research about cash holdings in developing countries is not extensive yet, it is possible that there are differences to be found between developed and developing countries.
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.
This study examines the use of Information Technologies (ITs), IT human capital, the level of IT vendor support, and their joint effects on firm's sensing and responding to IT changes (technological opportunism). Using data from the U.S. and Spain, the results suggest, that IT use and the firm's IT human capital are the main drivers of technological opportunism. The effect of IT vendor support on technological opportunism is country-dependent, with a U-effect in the U.S. and no effect in Spain. IT vendor support can have positive effects on technological opportunism if the firm invests in IT human capital.
The phenomenon of outsourcing has spawned a rich body of scholarly work in the last two decades. Yet, the answer to one important question has remained elusive: Does outsourcing really improve firm performance? Addressing this question is important as firms across nations continue to embark on the practice of outsourcing to save operating costs and remain competitive. Scholars, practitioners and policy-makers need to understand whether and how outsourcing benefits the firm. However, no comprehensive review of empirical evidence has been published so far that can address this question. This study reviews 57 empirical research articles that investigated the outsourcing–firm performance relationship in 47 peer-reviewed scholarly journals over a 20-year time-span (1996–2015). The articles differ widely in research scope, context, level of analysis, data source, time-span, industry sector, extent of outsourcing and measure of performance. The findings suggest that outsourcing can produce positive, negative, mixed, moderated or no significant impact on the firm. This study also provides useful directions for future research on outsourcing and firm performance.
A theoretical model is presented that identifies environmental and organizationalcharacteristics that affect human resource (HR) performance in an organization.Specifically, we address the issue of when and under what circumstancesdoes HR outsourcing contribute value to the firm by attempting to identify environmentaland organizational characteristics that affect HR department performanceand how HR outsourcing mediates that relationship. We propose that suppliercompetition in the HR provider market has a direct effect on the amount of HRoutsourcing which in turn has a direct effect on HR performance. Environmentaluncertainty (primary, competitive, and supplier) is proposed to moderate the relationshipbetween amount of HR outsourcing and HR performance while assetspecificity is proposed to moderate the relationship between supplier competitionand amount of HR outsourcing. An earlier version of this paper was presented atthe Southwest Academy of Management meeting in Houston, Texas, March, 2003,and received the 2003 Irwin/McGraw-Hill Distinguished Paper Award.
Constructs an analytical framework for a resource-based approach to strategy formulation. There are five stages in this framework: analyze resources, appraise capabilities, analyze competitive advantage, select strategy, and identify resource gaps. The concepts of this framework are illustrated by reference to existing U.S. firms such as IBM, Xerox, Harley-Davidson, and 3M. This framework uses resources and capabilities as the foundation for a firm's long-term strategy because they provide direction for firm strategy and serve as the primary source of firm profit. Resources are defined as the inputs into the production process and include items of capital equipment and skills of individual employees. Capabilities are defined as the capacity for a team of resources to perform some task or activity. When analyzing the competitive advantage of a firm, durability, transparency, transferability, and replicability are considered important factors. To be successful, firms must develop strategies which utilize their unique characteristics. (SRD)
This study empirically examined the extent to which outsourcing of both peripheral and near-core tasks influences firms’ financial and nonfinancial performance. In addition, the potential moderating effects of firm strategy and the environment on the outsourcing-performance relationship were examined. Results indicate that, whereas there was no significant direct effect of outsourcing on firm performance, both firm strategy and environmental dynamism moderated the relationship between outsourcing and performance.
Short-window event studies are popular in the strategic management literature. These studies assume that the market's initial reaction to strategic events reflects their economic impact in an unbiased manner. This assumption may hold in some cases, but when an event has complex ramifications that are difficult to predict, the initial market response may be biased and/or incomplete. Acquisitions are complex events, suggesting that results from short-window event studies of acquisitions may foster incorrect inferences. Using a sample of horizontal acquisitions, this article shows that the positive initial market response to an acquisition announcement is contradicted by negative long-run post-acquisition returns, suggesting that the initial response is incorrect and that the error is rectified later. Our findings imply that short-window event studies may not accurately capture the economic impact of complex strategic actions, for the interpretation and use of event studies.
This article investigates the business performance of a sample of companies announcing outsourcing contracts. Performance effects are investigated by measures including operating profit, earnings margin, return on shareholders’ capital, reduction in employment cost and research and development expenditure prior to and subsequent to the outsourcing announcement. The conclusion is that outsourcing companies’ profitability and liquidity decrease in years in which outsourcing announcements occur, and tend to increase in the subsequent year. Also, it is possible that the short-term and long-term financial structure of outsourcing companies is altered.
Purpose
The purpose of this paper is to develop a typology of human resource supply chain (HRSC) models that enable comparison of different models for making more informed strategic HR outsourcing decisions.
Design/methodology/approach
In the paper interviews and company documents were used to construct multiple comparative case studies.
Findings
The paper finds that five generic HRSC models were identified in two broad categories – two in‐sourcing models (local contracting and HR centralizing) and three outsourcing models (purchasing HR, non‐staffing HR, and staffing HR). Additional findings relate to the redistribution of power and competencies for managing HR within and between organizations.
Research limitations/implications
The paper shows that future research should account for different HRSC models to address various dependent variables, especially distribution of power and HR competencies in managing HR supply chains and contribution to firm performance. Future studies on strategic alliances can benefit from building on the HRSC models in building different types of partnerships.
Practical implications
In this paper it is found that managers have a means for comparison of different HRSC models to make more fully informed strategic outsourcing decisions and to develop related HR competencies related to each one of the generic models.
Originality/value
This paper clarifies critical differences in five different generic HRSC models that must be accounted for in research on strategic HR and outsourcing. Without understanding the differences in HRSCs, managers often unwittingly relinquish power and control over critical HR functions to other organizational units or vendor organizations.
This paper combines institutional economics with aspects of contract law and organization theory to identify and explicate the key differences that distinguish three generic forms of economic organization-market, hybrid, and hierarchy. The analysis shows that the three generic forms are distinguished by different coordinating and control mechanisms and by different abilities to adapt to disturbances. Also, each generic form is supported and defined by a distinctive type of contract law. The cost-effective choice of organization form is shown to vary systematically with the attributes of transactions. The paper unifies two hitherto disjunct areas of institutional economics-the institutional environment and the institutions of governance-by treating the institutional environment as a locus of parameters, changes in which parameters bring about shifts in the comparative costs of governance. Changes in property rights, contract law, reputation effects, and uncertainty are investigated.
Market efficiency survives the challenge from the literature on long-term return anomalies. Consistent with the market efficiency hypothesis that the anomalies are chance results, apparent overreaction to information is about as common as underreac-tion, and post-event continuation of pre-event abnormal returns is about as frequent as post-event reversal. Most important, consistent with the market efficiency prediction that apparent anomalies can be due to methodology, most long-term return anomalies tend to disappear with reasonable changes in technique. 1998 Elsevier Science S.A. All rights reserved.
Firms are increasingly implementing new performance measurement systems to track nonfinancial metrics such as customer and employee satisfaction, quality, market share, productivity, and innovation. This study examines the implications of nonfinancial performance measures included in compensation contracts on current and future performance. Contextual factors, environmental factors, and strategic plans vary across firms, and, in turn, adopting appropriate nonfinancial measures determine the performance consequences of such measures. Our findings support the contention that firms that employ a combination of financial and nonfinancial performance measures have significantly higher mean levels of returns on assets and higher levels of market returns. Although we find evidence that the adoption of nonfinancial measures improves firms' current and future stock market performance, we only find partial support for accounting performance improvements. Overall, the results indicate that the association between the use of nonfinancial measures and firm performance is contingent on the firm's operational and competitive characteristics.
Outsourcing has become increasingly attractive for many organizations. Much attention has focused recently on the outsourcing of staffing. A much less noticed, though growing, business has been that for human-resources business-process outsourcing, or HR-BPO. Some observers see outsourcing as a key trend shaping the future of HR. outsourcing any business activity creates potential risks as well as benefits. This article synthesizes the strongest of the available research and identifies the six key factors that companies should consider when making important outsourcing decisions: 1. dependency risks, 2. spillover risks, 3. trust, 4. relative proficiency, 5. strategic capabilities, and 6. commitment versus flexibility. The six factors of outsourcing were major considerations in a landmark outsourcing deal that BP signed with Exult Inc. in December 1999.
This paper investigates how firms' decisions to outsource or internalize production affect their technological performance. While several popular arguments and some anecdotal evidence suggest a direct association between outsourcing and technological performance, the effects of firms' governance decisions are likely to be contingent upon several specific attributes underlying a given exchange. This paper first demonstrates how standard performance models can improperly suggest a positive relationship between firms' outsourcing decisions and their technological performance. Models that account for firm- and transaction-specific features are then presented, which indicate that neither outsourcing nor internalization per se result in superior performance; rather, a firm's technological performance is contingent upon the alignment between firms' governance decisions and the degree of contractual hazards. Copyright © 2002 John Wiley & Sons, Ltd.
We examine the relationship between product differentiation strategies and profitability for different categories of producer goods industries classified according to the extent of buyer search. Models developed using the structure-conduct-performance paradigm of industrial economies are estimated with FTC Line of Business data. The results indicate that product differentiation is based on “custom services” (technical and information services) provided by manufacturers for high-search producer goods and on “intermediate services” (assortment and inventory services) provided by merchant wholesalers for low-search producer goods.
We examine a sample of strategic alliances made by financial services firms during 1986 to 2003. The market reacts positively to the announcements of alliances and seems to incorporate the information about the value of alliances at the time of alliance announcements. We find no evidence of abnormal stock performance after announcements. Our results also suggest that strategic alliances usually are used as a final form of cooperation rather than as a first step towards closer cooperation between firms. For instance, only about 5% of alliances are followed with joint ventures or mergers of partner firms. Nevertheless, strategic alliance firms are more likely to form joint ventures or merge than randomly selected and matched firms. Furthermore, the market reacts more favorably to the alliance announcements by firms that are subsequently acquired by the alliance partners.
This article contributes to the social networks literature by examining how corporate governance factors influence CEOs' external advice-seeking behaviors. We incorporate insights from social networks research into an agency theory perspective to predict, and demonstrate empirically, that governance factors recommended by agency theory increase CEOs' tendencies to seek out advice contacts who are likely to offer perspectives on strategic issues that differ from their own; these advice-seeking behaviors ultimately enhance firm performance. Accordingly, this article also contributes to the corporate governance literature by describing how and why CEOs' advice networks mediate the effects of governance factors on firm performance.
This study empirically examined the extent to which outsourcing of both peripheral and near-core tasks influences firms’ financial and nonfinancial performance. In addition, the potential moderating effects of firm strategy and the environment on the outsourcing-performance relationship were examined. Results indicate that, whereas there was no significant direct effect of outsourcing on firm performance, both firm strategy and environmental dynamism moderated the relationship between outsourcing and performance.
Research indicates that successful adoption of information technology to support business strategy can help organizations gain superior financial performance. The recent wave of enterprise-wide resource planning systems adoptions is a significant commitment of resources and may affect almost ail business processes. This study examines the effect of adoption of enterprise systems on a firm's long-term financial performance. A large-scale data identification and collection method compared the fi- nancial data of 247 firms adopting enterprise wide systems with a matched control group of firms cross-sectionally and longitudinally before and after adoption. A number of implementation characteristics were also measured and their effects assessed. The results show that firms adopting enterprise systems exhibit higher differential perfor- mance only after two years of continued use. Furthermore, controlling for implementa- tion characteristics as vendor choice, implementation goal, modules implemented, and implementation time period, helped explain the financial performance effects of enter- prise resource planning system use. These results provide important insights that comple- ment extant research findings and also raise future research issues.
The objective of this research project is to examine the impact of information systems (IS) outsourcing announcements on the market value of contract‐granting firms. This study is important to researchers, professionals, and policy makers as it provides empirical evidence from the capital market that outsourcing is considered to be a value‐added business exchange for contract‐granting firms. Research findings indicate positive and significant market value gains for smaller vs. larger firms and service vs. nonservice industry firms. The significant effects observed in this study are explained by the existence of information asymmetry in the capital market for smaller firms and service firms, and by the relatively higher investment made by service firms in information technology. This study contributes to accounting research by examining the importance of providing financial report users with nonfinancial forward‐looking information concerning management's strategic decisions, such as the decision to outsou...
Purpose
– There are continuing pressures to improve administrative efficiency in human resource management (HRM). Following the professional and academic literature, proposes “payroll” as an ideal candidate for outsourcing in order to drive costs down.
Design/methodology/approach
– The research uses a transaction‐cost‐economics perspective to identify efficiency implications of varying governance decisions. Ten distinct payroll activities that account for a generic payroll workflow are identified. Then the costs of carrying out these distinct payroll processes, either market‐ or hierarchy‐based, are analysed in 20 case studies of UK‐based organisations.
Findings
– While key payroll activities were more costly when outsourced, there were efficiency gains in supplementary activities and lesser investment in IT software and maintenance.
Originality/value
– These insights are important for cost‐based make‐or‐buy decisions. Influence factors on governance decisions, however, went beyond considerations of transaction costs, quality and risks to include historical, political and individual rationales. They are depicted in a framework of outsourcing motivations.
Market efficiency survives the challenge from the literature on long-term return anomalies. Consistent with the market efficiency hypothesis that the anomalies are chance results, apparent overreaction to information is about as common as underreaction, and post-event continuation of pre-event abnormal returns is about as frequent as post-event reversal. Most important, consistent with the market efficiency prediction that apparent anomalies can be due to methodology, most long-term return anomalies tend to disappear with reasonable changes in technique.
Purpose
The debate on human resource (HR) outsourcing is polarised. HR outsourcing is seen as an opportunity for the HR function by some and as a threat by others. The first view suggests that HR outsourcing is an instrument creating time for HR to become a strategic partner. The second view considers HR outsourcing as a cost‐cutting instrument gradually reducing HR staff. The purpose of this study is to examine whether HR outsourcing is a manifestation of a strategic HR focus, a cost‐cutting HR focus or both.
Design/methodology/approach
The sample is obtained from an economy‐wide, cross‐sectional survey. The data cover 1,264 organisations with ten employees or more.
Findings
Results indicate that organisations with a strong focus on HR cost‐cutting do not outsource more than organisations with a weaker focus on HR cost‐cutting. The analyses show a positive relationship between a strong focus on strategic human resource management (HRM) and the level of HR outsourcing.
Research limitations/implications
First, this study examines the breadth of HR outsourcing. Further research might consider the depth of HR outsourcing. Second, as results are based on cross‐sectional data we cannot draw causal inferences. Finally, future research might focus on the impact of HR outsourcing on the organisation of the HR function and internal HR customer satisfaction.
Practical implications
HR outsourcing empowers the HR department. It frees up HR professionals to focus on strategic HRM.
Originality/value
HR outsourcing has been heavily debated. Yet, empirical research into the impact on the HR function is extremely limited. This study helps to fill this gap.
Given the increasing use of and considerable debates on human resource outsourcing (HRO), this study critically reviews the existing literature on a selection of HRO issues. It concludes that HRO has been widely practised since 1990, but its growth is modest rather than overwhelmingly rapid, and so is the anticipated future development. While saving costs, seeking better services and enhancing core competency are the main reasons for HRO, there is no evidence suggesting that these objectives have been easily achieved. There is no clear pattern of outsourcing HR activities, which points to the limitation of the traditional approach with regard to core and periphery issues. The effective management of HRO greatly lies in selecting the right vendors, ensuring service quality, building strategic relations and managing changes. This study also discusses the implications of the findings and the directions for future research.
As increased use of outsourcing by a number of firms within North American has produced significant changes over the last decade in how the human resource function delivers services. In this article, we draw on transaction cost economics, the resource-based view, the HR architecture literature, and institutional theory to examine why these changes have been observed. Following this, we use these same theoretical perspectives to examine how different types of firms are likely to make use of outsourcing in the future to provide human resource services and programmes.
Purpose
Outsourcing emerged as a popular operational strategy in the 1990s and most of current literature was established in the same time. However, the result of outsourcing is still vague. The purpose of this article is to point out gaps in the current literature and examine the link between outsourcing implementation and firms' performance metrics by analysing hard data.
Design/methodology/approach
In this research, current outsourcing research (from 1990 to 2003) methodologies are grouped by five categories: case study, survey, conceptual framework, mathematical modeling, and financial data analyses; research scope is identified by three areas: outsourcing determinant, outsourcing process, and outsourcing result.
Findings
This article figures out three main gaps in the current literature: lack of objective metrics for outsourcing results evaluation, lack of research on the relationship between outsourcing implementation and firms' value, and lack of research on the outsourcing contract itself.
Research limitations/implications
If research is reported on in the paper this section must be completed and should include suggestions for future research and any identified limitations in the research process.
Originality/value
Based on the literature review, the author provides the roadmap of future research on outsourcing results. To our best knowledge, this is the first comprehensive literature review which informs the major gaps and future research opportunities in outsourcing study.
Although HR activities have traditionally been performed in-house, organizations are increasingly relying on outside contractors to perform these activities. Using a Transaction Cost Economics perspective, this study examined whether organizational-level factors moderated the relationship between the degree of reliance on HR outsourcing and the perceived benefits produced by outsourcing. Moderated regression was performed using data provided by over 300 HR executives on outsourcing levels, organizational characteristics, and the perceived impact of outsourcing. Support was found for a number of the transaction cost hypotheses regarding the impact of organizational characteristics. Specifically, the relationship between the degree of outsourcing and the perceived benefits generated was moderated by reliance on idiosyncratic HR practices, uncertainty, firm size, and cost pressures. No support was found for hypotheses regarding the moderating effect associated with pay level, overall outsourcing emphasis, or strategic involvement by HR.
This study investigates the relationship between a number of organizational characteristics and the decision to outsource HR. Determinants of the outsourcing of four categories of HR are examined: HR generalists activities (e.g., performance appraisal), transactional activities (e.g., payroll), human capital activities (e.g., training), and recruiting and selection. HR executives in 432 organizations provided data on outsourcing levels and organizational characteristics. Reliance on HR outsourcing was associated with idiosyncratic HR practices, strategic HR involvement, positive HR outcomes, promotional opportunities, demand uncertainty, and pay level. As predicted, however, the impact of organizational characteristics varied among the different types of HR activities outsourced. © 2001 John Wiley & Sons, Inc.
This paper develops a theoretical model to explain corporate divestment in the context of accounting-based valuation and provides empirical evidence to support the model's predictions. Building on Zhang's (2000) real-options-based equity value model, we develop a model to explain why firms with multiple business segments may have incentives in financial reporting to shift earnings from one segment to another to influence market valuation. Cross-segment earnings shifting, however, causes information asymmetry about segmental performance, which leads to market misvaluation. Divestment arises as a voluntary commitment by (some) firms to not engaging in segmental earnings manipulation, with the aim of restoring valuation accuracy. Our theoretical analysis yields a number of testable implications. Consistent with our model's predictions, we find empirically that i) divestment is preceded by an increased divergence in profitability between the divested and continuing segments of the divesting firm, ii) there are positive abnormal stock returns surrounding divestment announcements that are not dependent on increased expectations about future operating performance, iii) the magnitude of market revaluation increases with the profitability divergence between the divested and continuing segments, and iv) market revaluation is greater for more complex firms (in terms of having a larger number of segments and greater uncertainty facing investors).
The empirical research examining the association between typical measures of corporate governance and various accounting and economic outcomes has not produced a consistent set of results. We believe that these mixed results are partially attributable to the difficulty in generating reliable and valid measures for the complex construct that is termed corporate governance. Using a sample of 2,106 firms and 39 structural measures of corporate governance (e.g., board characteristics, stock ownership, institutional ownership, activist stock ownership, existence of debt-holders, mix of executive compensation, and anti-takeover variables), our exploratory principal component analysis suggests that there are 14 dimensions to corporate governance. We find that these indices have a mixed association with abnormal accruals, little relation to accounting restatements, but some ability to explain future operating performance and future excess stock returns.
Most prior outsourcing studies in the human resources domain have focused on the initial decision for outsourcing HR activities. Hence, little is known about HR managers' commitment to continue an already existing outsourcing relationship. This study constitutes a first step to increase our understanding of the factors related to the continuity of HR outsourcing relationships. We developed and tested a model of HR managers' (N = 186) commitment in outsourcing relationships. Affective commitment or the desire for the outsourcing relationship to continue was related to the depth and frequency of HR outsourcing. Conversely, continuance commitment, which refers to the constraints that keep the outsourcing relationship intact, was not related to the continuity of HR outsourcing. Finally, affective commitment was fostered by HR managers' perception that HR vendors shared the same values for managing people. © 2008 Wiley Periodicals, Inc.
This study examines the association between activity-based costing and manufacturing performance. Results using a cross-sectional sample of manufacturing plants indicates that extensive ABC use is associated with higher quality levels and greater improvements in cycle time and quality, and is indirectly associated with manufacturing cost reductions through quality and cycle time improvements. However, on average, extensive ABC use has no significant association with return on assets. Instead, we find weak evidence that the association between ABC and accounting profitability is contingent on the plant’s operational characteristics.
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.
To understand the performance implications of corporate strategies as conditioned by business group affiliations, we analyze the relation between corporate diversification and performance for 889 Indian firms. We find that diversified firms perform significantly worse than focused firms and that there exists a significant negative relation between the degree of diversification and firm performance. A comparative analysis of firms affiliated with Indian business groups and those affiliated with MNCs indicates that the sources of negative impact of diversification on performance are conditioned by the nature of a firm's affiliation. For multinational affiliates, diversification is associated with poor asset quality and asset management, which is an indicator of possible agency conflict. For domestic business group affiliates, diversification is associated with cost inefficiencies and poor performance.
Extant research offers two alternative mechanisms for relating the asset specificity of a cooperative relationship to partnership performance. Transaction cost economics argues that the specific assets invested in a partnership increase the hazards of opportunism. As firms select appropriate governance structures to reduce opportunistic behavior, performance increases. On the other hand, relational exchange theory suggests that asset specificity enhances the trust between partners, which in turn leads to more cooperative behavior and higher partnership performance. This paper tests both mechanisms simultaneously on a sample of procurement relationships between Hong Kong trading firms and their Chinese suppliers using SEM methods. Our results support the predictions of relational exchange theory more than those of transaction cost economics. The paper also discusses the role of the Chinese context on theory application.
Cost reduction has become a preeminent goal for businesses. Since firms spend a significant portion of their annual revenues on the acquisition of an array of goods and services from suppliers, organizational procurement has been identified as an area holding tremendous potential for the removal of nonvalue-adding costs. This effort examines how a vendor's order management cycle performance and trust can affect a customer firm's transaction costs, which in turn, affect such customer-related outcomes as customer satisfaction and future purchase intentions. The results are theoretically meaningful as they address gaps identified in previous writings and pragmatically useful as they offer managers practical insight into important bases for securing a competitive advantage.
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.
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.
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.
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.
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.
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.
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.)
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.
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.
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.