Does insourcing of processes pay off?

Abstract

Purpose This study aims to examine whether insourcing of processes pays off and verifies key hypotheses regarding the financial ratios of organisations. Design/methodology/approach This paper randomly selects and then surveys 1996 organisations, of which 9.5% (190) stated that they used insourcing, 1.9% (37) made a decision to implement insourcing in the near future and 88.6% did not use insourcing. Then, for available firm data (100 insourcing firms and 100 firms without it), the financial statements of the surveyed companies were obtained to compare the most important financial ratios. The financial situation was compared at four-time points. The mean and median values of individual indicators were compared with the significance of relevant statistical tests. Findings A U-shaped curve of financial results in the time of enterprises that implemented insourcing and reverse U-shaped curve for enterprises that did not have insourcing are seen. Thus, the insourcing of processes pays off in the long run. Research limitations/implications Limitations exist in the generalisation of the results obtained, due to the limited number of samples qualified for analyses (limited reliable financial data). Practical implications The research highlights the importance of effective insourcing projects in the long term. Originality/value This study is the first to quantify the financial performance of companies that have used insourcing in comparison with a reference group. This paper defines insourcing and contributes to the growing number of studies on insourcing by bringing attention to the financial outcomes in the long run.