Outsourcing and financial performance: A negative curvilinear effect

Masaaki Kotabe, Michael J. Mol*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

61 Citations (Scopus)

Abstract

This study asks how a firm's degree of outsourcing across all activities influences financial performance. We argue there is an optimal degree of outsourcing, where firms outsource some activities yet integrate others, and that deviations lower performance in a negatively curvilinear fashion. We find empirical support, using 1995 and 1998 data on a sample of manufacturing businesses in the Netherlands, and show that the steepness of the curve increases under conditions of high uncertainty. We show the magnitude of the uncertainty effect on performance outcomes through a post hoc scenario analysis. Thus we provide a specific, theoretically and empirically grounded prediction of how outsourcing affects performance with implications for theory and practice.

Original languageEnglish
Pages (from-to)205-213
Number of pages9
JournalJournal of Purchasing and Supply Management
Volume15
Issue number4
DOIs
Publication statusPublished - 2009 Dec
Externally publishedYes

Keywords

  • Manufacturing
  • Negative curvilinear effect
  • Outsourcing
  • Performance
  • The Netherlands
  • Vertical integration

ASJC Scopus subject areas

  • Strategy and Management
  • Marketing

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