Outsourcing and firm performance: a meta-analysis

Abstract

Purpose In the extant literature, the effect of outsourcing activities on the firm performance has been an area of interest for several decades; yet, the body of knowledge lacks a holistic view of this phenomenon. The potential outcomes of outsourcing and its impact on firm performance have not been aggregated in the literature. The purpose of this paper is to conduct a meta-analysis of 51 empirical results using 24 articles to examine the relationship between these variables and firm performance. The authors discuss the extant literature and examine which type of outsourcing has the greatest influence on firm performance. The authors also present the limitations and future opportunities. Theoretical and managerial implications are discussed to highlight which outsourcing functions would be fiscally beneficial for firms. Design/methodology/approach This paper takes a granular approach by looking at different outsourced functions in the both the manufacturing and service industry. Using meta- analysis, this paper combined the quantitative study data from several selected studies in an effort to increase power, improve the effect size and resolve the uncertainty about the effects of outsourcing activities on firm performance measures. Findings The authors found that outsourcing enhances the firm performance. When outsourcing functions were studied individually, only IT outsourcing had significant effects on firm performance in comparison to other forms of outsourcing. This might be attributed to the fact that IT outsourcing is less costly to implement in the organization compared with other forms of outsourcing. Originality/value This paper is the first paper that uses a meta-analytic approach to investigate the relationship between outsourcing and performance measures based on past empirical studies that have used both primary and secondary data.